Ed Driscoll

A Hayekian Teaching Moment

That’s what Steve Hayward is calling “The Obamacare Rollout Debacle” today at Forbes:

The debacle of the rollout of Obamacare is yet another moment for re-learning the fundamental truth about how little we know about what we think we can control.

That last phrase comes from F.A. Hayek, of course.  Hayek died in 1992, on the cusp of the World Wide Web and the explosion of the Internet, which has transformed our economy and our individual lives profoundly.  In one of his last interviews with Forbes magazine shortly before his death, Hayek was asked whether the rapid advances in technology and computing power made economic management—planning and regulation—more feasible.  Hayek was emphatic that no matter how big and how fast our computing power got, it did not change the fundamental defect of all centralized economic control: the problem is not simply mastering or processing a large amount of raw data.  Information and circumstances change too quickly.  More fundamentally, the data necessary for centralized decision-making is not available at all.

Right now the planners and architects of Obamacare are blaming the dysfunction of its launch on software “glitches” that will, eventually, be ironed out.  The problem is one of server “bottlenecks,” bad software code, and the lack of adequate testing.  The success of massive data handling in the private sector by Google, Amazon, and Facebook should give us confidence, the optimists argue, that all will be well with another few months and another few hundred million dollars on top of the roughly $600 million spent already on the online portals.  Donald Berwick, a former administrator for Medicare and Medicaid, offered up the favorite bureaucratic excuse to the New York Times: “We did not have enough money.”

Is it a mere coincidence that the National Security Agency is having similar difficulties with its massive new data gathering and analysis center in Utah?  These dual data debacles have more in common than is contained in the usual dichotomy of public sector incompetence versus private sector incentive and focus.  In other words, it is superficial to say that if only Steve Jobs or Amazon.com founder Jeff Bezos were in charge of these enterprises they’d work better.


They wouldn’t; as Kevin D. Williamson wrote in his 2010 book, The Politically Incorrect Guide to Socialism, “socialists of the Marxian bent hold prices to be at some level objective:”

Under the socialist understanding, prices are endogenous, an aspect of the thing itself, reflecting the material, resources, time, expertise, and—above all—the labor involved in its creation. But for [Ludwig von Mises 1881-1973], and for practically all modern economists, prices are exogenous, reflecting only how people value a particular product. This may seem like an oversimplification—a product is only worth what you can sell it for—but, in practice, the radical subjectivism of Mises provides an infinitely richer and more nuanced model of pricing—and thus of human action—than does the static Marxist model. That’s because the Mises model asks not only, “What is it worth?” but, “What is it worth? To whom? At what time? In what context? In relation to what other goods?”

Mises not only rejected Marx’s theory of pricing, he went a step further, arguing that the lack of real market prices in a socialist economy would make economic calculation impossible. If we define socialism as economic central planning conducted in accord with rational economic calculation, Mises argued, socialism is not just impractical, but beyond realization. That is to say, socialism is impossible, because without prices there can be no economic calculation, and therefore, no economic planning in the real sense of the phrase. To the extent that the socialist powers of Mises’ day—the Soviet Union prominent among them—engaged in economic calculation, they were able to do so only because prices were being calculated in the capitalist economies. Socialism, Mises argued, was not only a material and economic parasite succored by capitalist prosperity, but also an intellectual parasite. In other words, socialism needed capitalism to do its thinking for it.


Which is why “ObamaCare, Like All Central Planning, Is A ‘Big Failure,'” Investors Business Daily noted yesterday:

On MSNBC’s “Morning Joe,” [Journolist founder Ezra Klein] acknowledged that ObamaCare was having great trouble with its rollout. He noted that it’s now “a couple of weeks in and people can’t sign up,” even though some “have tried 20, 30, 40 times.”

“One of the Obama administration’s jobs, separate from all of the political stuff we talk about here, is to simply run things like this well, to run their signature legislative initiative well,” said Klein.

“On that, so far, this has been a big failure.”

Did he expect something else? Was he anticipating some kind of grand opening, a glorious balloon-release of reform that transitioned into a smooth sailing for all?

To do so would have been naive, because history — and common sense, along with a large catalog of economic theory — tells us that central planning has not and cannot work.

What works and always has is voluntary cooperation among free people. Consumers and producers don’t need functionaries in Washington managing their transactions. Groceries, wrist watches, cheeseburgers, bowling balls, aspirin and any number of other goods and services are bought and sold just fine without government involvement. These markets organize themselves.

Buyers and sellers speak clearly to each other through price signals. Government planners would only wreck what has developed efficiently on its own.

It’s foolish to believe a group of planners in Washington, D.C., or anywhere else, could organize a market as large and complex as health care.

Big businesses usually start out as small enterprises, then develop over time. ObamaCare tried to start out as a mega-corporation serving a customer base exceeding 300 million people and learned the hard way that it didn’t work.

Ensure that all Americans have health insurance coverage at an affordable cost is simply too much to manage. A goal so ambitious always will be.


But Americans, like the British and the Soviets before them, need to learn that lesson the hard way, including, as David French writes at the Corner, “The Hidden Heartlessness of the Obamacare Rollout:”

It doesn’t seem to occur to the “do you hate Obamacare more than you love your country?” MSNBC crowd that oppenents of Obamacare might actually care about real people — how they get their health care, whether they can afford the health insurance they’re required to buy, and whether the government is competent enough to create a program that can even work.

Eventually, the current news cycle will end, and (I agree with Ramesh) discussion about whether the Republicans missed an “opportunity” to highlight Obamacare’s failings will fade to irrelevance. We’ll be left with the reality of a program that will directly affect the daily lives of many, many more millions of Americans than those who follow the political news cycle. And for many of them, Obamacare means financial hardship, health-related uncertainty, potentially punitive taxation, and fewer employment opportunities.

So, my answer to the MSNBC question is another question: “Why do you love Obamacare more than you love Americans?”

Because leftists, by and large, much prefer intellectual abstractions over real people. Or as Hayek himself wrote in 1949, four years after the conclusion of a World War fought by varying degrees of socialist regimes:

The political development of the Western world during the last hundred years furnishes the clearest demonstration. Socialism has never and nowhere been at first a working-class movement. It is by no means an obvious remedy for the obvious evil which the interests of that class will necessarily demand. It is a construction of theorists, deriving from certain tendencies of abstract thought with which, for a long time, only the intellectuals were familiar; and it required long efforts by the intellectuals before the working classes could be persuaded to adopt it as their program.


“Democracy is the theory that the common people know what they want, and deserve to get it good and hard,” H.L. Mencken said during the era of Woodrow Wilson, America’s first “Progressive” president. How good and hard?

This good and hard.

Update: The Chicago Tribune, Mr. Obama’s hometown newspaper, “drops the hammer on Obamacare,” Mary Katharine Ham writes tonight at Hot Air.

Just imagine how truly rancid a government program must be, when a “liberal” newspaper is condemning it in the state where four of the state’s last seven governors have done time.

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