The Obamacare Rollout Debacle Is A Hayekian 'Teaching Moment'

Healthcare.gov User Experience, after Andreas Vesalius (Photo credit: Mike Licht, NotionsCapital.com)

By Steven Hayward
The necessity of re-learning fundamental truths at regular intervals should not surprise beings whose moral history begins with succumbing to the false temptation of the serpent before the Tree of Knowledge that “ye shall be as gods.”  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.
It’s possible that with enough code and enough server farms the Obamacare exchanges may eventually work more “smoothly” in the sense that someone can get all the way through to the end and actually end up with health insurance.  The essential failure of the whole enterprise is already evident, however, and will only get worse.  The large subsidies required to prompt many uninsured people to enroll will further skew the real costs—and price signals—that genuinely functioning markets require as feedback information.
The Byzantine world of health care prices today—good luck finding out what a hospital procedure actually costs—will grow steadily worse under the new world of Obamacare.  I have called what is happening a great “re-learning” of Hayek’s lesson about why attempts to command complex economic phenomena are inherently doomed to fail, but most liberals never learned this lesson in the first place.  The increasing difficulties of Obamacare will be taken as proof that we need to go all the way to single-payer health care.  Sen. Harry Reid has already suggested that the patchwork scheme that is Obamacare is just a halfway house on the way to single-payer, as did a little known Illinois state senator named Barack Obama more than a decade ago.
For liberals, failure is just another reason for expanding regulatory reach further—a variation of “never let a good crisis go to waste.”  This has been the story of roughly the last hundred years for the most part.  With only a few limited exceptions (like transportation and energy deregulation), the patterns has been for government failures to beget new government failures—a pattern that has become known as the “ratchet effect.”  The great question of Obamacare is whether we’ve finally reached the point at which the ratchet wrench of ever-bigger government will snap.
Steven F. Hayward is the visiting scholar in conservative thought and policy at the University of Colorado at Boulder.  He writes daily at Powerlineblog.com.