Obamacare’s Fatal Flaws: Complexity and Central Planning

| July 7 2012
David Leeper

Quite apart from all the legal wrangling and politicking surrounding it, Obamacare has two fatal flaws that doom it to failure — (1) design-from-scratch complexity and (2) central planning and control.

In simple terms, because of these two factors:

It.  Won’t.  Work.

Obamacare is surely one of the most complex sociological, technical, financial, legal, and political systems ever conceived. Moreover, much of the system pictured above is being designed from scratch, and it is all supposed to work from rules and regulations set and managed largely by HHS central contol in Washington.

First, regarding design-from-scratch complexity:

Over a 40-year career in telecommunication systems engineering, I developed great respect for the following aphorism, sometimes known as Gall’s Law:

  • A complex system that works invariably began as a simple system that worked.
  • A complex system designed from scratch never works and cannot be patched to make it work.
  • You have to start over from a working, simple system.

Our federal government has shown that with the arguable exception of the military, it cannot manage anything very well.  Any one of the hundreds of subsystems shown in the chart above is a major challenge for any competent system engineer, let alone politically appointed bureaucrats who focus primarily on empire building and self-preservation.

Even those few subsystems that seem to work in isolation will fail at their interfaces with other systems.  Designing those interfaces to work correctly and efficiently is the hardest part of building any large system, and it is at those interfaces that we’ll see the most intense finger-pointing between those in charge on opposite sides of each interface.  The whole thing is a system engineer’s nightmare and a techno-political debacle in the making.  The situation couldn’t be worse if one had deliberatetly set out to create a disaster.  It is a modern-day Tower of Babel.

Second, regarding central planning and control:

The history of central planning and control in the USSR, China, North Korea, and other socialist regimes should compel us to avoid central planning on anything as large as our national health care system.  Closer to home and on a smaller scale, but also involving life-and-death issues, is the dramatic failure of central planning in the community at Plymouth Rock,1620-1622, that nearly led to mass starvation of the entire community.

In all of these cases, even well-intended leaders found that no one would put in any extra effort on anything unless they had personal incentives to do so.  As failure loomed, Communist countries infamously resorted to force, guns, gulags, prisons, and virtual slavery on collective farms.

On the other hand, at Plymouth Rock, Governor William Bradford abruptly turned away from central control and social-justice-based “equal shares of everything for everybody” to a decentralized system based on personal property and free-market trading.  Consequently, there was extra reward for extra effort, and the Plymouth community went from near starvation to prosperity in short order.

In addition to the incentives problem, centralized control suffers horribly from poor information flow.  By the time even well-intended centralized control can react to the facts, too much damage has been done.  And what little information central planners do get is polished and distorted to protect lower-level bureaucrats who rightly fear they’ll lose their position and livelihood if they deliver bad news.

A good example of failure that many of us remember is the 1973-74 Arab oil embargo.  Congress’ Emergency Petroleum Allocation Act, passed the month before the embargo, mandated from Washington how supply reductions had to be handled, rather than allowing the usual market forces to work.  The feds may have meant well, but they simply weren’t up to the job.  Some areas had plenty of gasoline, and some areas were starved for it.  A buying panic set in, and people sat in gas lines for hours, engine idling, hoping to top off their tank.  It was a complete botch.  And that allocation problem was orders of magnitude simpler than the health care system Washington wants to control.

So what’s the answer?

Let free market competition and chaos reign.  Seriously.  It sounds risky and unpredictable, but as Milton Friedman pointed out, it is only the millions of large and small voluntary trades and interactions in any economic system that can make any large economic system work as a whole.  Hong Kong, Singapore, pre-socialist America and Europe, and Bradford’s little colony at Plymouth Rock are all examples.

A follow-on article will present more on this theme as well as the necessary and proper role of government in national health care.

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