Yuval Levin writes a review of ‘Why Government Fails So Often’ by Peter H. Schuck in The Wall Street Journal
To be successful, he argues, a public policy has to get six things right: incentives, instruments, information, adaptability, credibility and management. The federal government tends to be bad at all of these. Take Medicare, a popular program. By paying a set fee for each service, it creates perverse incentives for doctors to perform more of them. Then, by using the instrument of price controls to limit costs, it creates shortages. By setting those prices administratively, it denies itself the information that only the interplay of supply and demand can offer. By imposing a mid-1960s insurance model on American medicine, it makes the health-care system inflexible. By relying on payment cuts that Congress routinely puts off, it makes a joke of its own fiscal projections. And by abiding billions in fraud, it invites waste and abuse. The sum of it all is a colossal mess at the heart of American health care. Mr. Schuck lays out many such failures in great detail.
Especially insightful are his discussions of the fundamental dysfunction of the federal bureaucracy. Mr. Schuck argues (echoing Hayek) that it is essentially impossible for centralized managers to consolidate information to the degree necessary to manage complex social systems, and bureaucracies respond to failure by demanding even more power. This assertion of authority, precisely because it is poorly informed, further distorts the system, making it even harder to control. Think of the unintended consequences of airline and trucking rules before the late 1970s deregulation, for instance, or of what ObamaCare is now doing to the health-insurance system. The proper sphere of the central government, Mr. Schuck argues, is to set goals and arrange incentives so that society’s knowledge can be better put to use by its dispersed possessors.
Most initiatives—whether of the left, right or center—are likely to fail, and politicians should contend with this fact by crafting policies as simple and incremental as possible.
There is a myth that big problems require big and complex solutions, yet it is the complexity that is often the problem and government solution often compound the problem by adding more complexity. A good government has to understand its limitations.