Arnold Kling  

Trial and Error

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Calomiris on the Financial Cri... Do You Like Science Fiction?...

Atul Gawande says something I believe to be true and something I believe to be false. What I believe to be true:


To figure out how to transform medical communities, with all their diversity and complexity, is going to involve trial and error.

What I believe to be false:

Getting our medical communities, town by town, to improve care and control costs isn't a task that we've asked government to take on before. But we have no choice. At this point, we can't afford any illusions: the system won't fix itself,

Gawande has no concept of the relative ability of government and markets to deal with ambiguity. He thinks that markets are unable to adopt new processes without government pressure. He thinks that government is well equipped to experiment.

There indeed are examples of markets that do not evolve effectively. There are examples of government-led experiments that pay off. But mostly it is the other way around. The incentives work much better in markets. In markets, the tendency is to reward success and to punish failure. In government, failed programs persist, and success receives no special reward.

For the pointer, thanks to Peter Orszag


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COMMENTS (6 to date)
Doc Merlin writes:

Not only that, its far worse than that. In governments, failure is selected for, which is why the US is debating adopting nationally a horrific combination between the terrible Massachusetts and Maine plans for healthcare.

floccina writes:

I ran into the below while helping my son on a school assignment. Is the Amish experience evidence that reducing insurance (say by encouraging higher deductibles) is the best route to reducing costs. As costs are rising employers are raising deductibles so is the problem on the mend. After all unsustainable trends will come to an end.

http://www.amish.net/faq.asp
Question: What is the average life expectancy of Amish men and women and what is the number one cause of death in the Amish communities?

Answer: It is the same as for all persons in the United States, no different than for other groups of people. Answer coordinated by THE BUDGET [Editor: According to US Government Statistics, the average life expectancy for Caucasian men is 74.3 and for Caucasian women is 79.9. The leading cause of death is heart disease.]
...

Question: Do the Amish go for health care services? How do they deal with technological advances of health care? Do the Amish allow the Doctors to go all out when they are ill or do they place restrictions on medical care provided? Do they believe in immunizations?

Answer: The Amish use local doctors, dentists, eye doctors, etc., and will go to specialists and hospitals as needed. They make use of advances in health care that are used in hospitals, etc. They generally try home remedies for ailments first before going to a doctor or the hospital. They also are inclined to go to Mexico for major treatments because of the cost of medications. [Editor's note: The Amish do not participate in medical or insurance plans and instead pay for all medical costs themselves.] The children do get immunizations (although not all may do so just as not all Englishers may do so either). Answer coordinated by THE BUDGET.

Notice that they avoid the problem of excessive licensing by going to Mexico for care.

Here are my thoughts on a health care compromise:

http://un-thought.blogspot.com/2009/09/healthcare-compromise.html

Norm Cimon writes:

All the evidence argues just the opposite. Our private system is already the most expensive in the "industrialized" world by a long shot. All the other systems, with varying levels of government involvement, are cheaper, much cheaper. Why is that? Are all those countries smarter than us? Do they have a special class of bureaucrat, one that doesn't exist here? Do you really believe that tripe?

We don't need anything from government in this case except a payment clearing house, and an information base that blows up all those stove-pipes. That would change the system so quickly it would be unrecognisable in just a few years. Think about it. It's 2009 and there is no way to find out who charges what, where, and how often for each patient. That's pathetic.

All the interests have been singing the same song for years, that sharing information would be impractical and insecure, as if computers don't exist and the Internet has yet to be invented. Information, that's all that's needed. And government is just the engine to coordinate it's delivery. In fact, it's safe to say that every other party with a financial stake in this will fight as if their life depends on it to keep this from ever happening, to keep everyone in the dark. Any innovation that kicks off competition threatens the greedy and poorly managed ones, so their lives in that sense, do depend on it. That's no surprise, is it?

david writes:

What are these mythical examples of markets that do not evolve effectively? The Masonomist creed says "markets fail" but I've never seen a masonomist concede any particular market failure. Besides Cowen, but he's a deliberate contrarian.

It seems like an excuse to duck any charges of Chicago-style unrealism whilst still assuming that markets don't fail.

Dan Weber writes:
Do they have a special class of bureaucrat, one that doesn't exist here?
Other countries may be less infected with democracy than ours. Observe the Senate, when presented with evidence that mammograms are generally not beneficial for women in their 40's, acted in pure defiance of the science, much like a teenager.

I think we could have a good government-run system here in the U.S., but the very first thing we would have to do is insulate it from politics. So can Congress agree to create something it won't control? Could it somehow be created under the executive branch, like the Fed (sorta) operates today?

CJ Smith writes:

I raised this question in David's "Calomiris on the Financial Crisis" post, but I think it is equally applicable here:

Can anyone point me to research on the effect of insurance on price sensitivity and risk assessment in medical treatments? Thanks in advance.

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