Wednesday, October 21, 2009

Mandates and the information problem 

I was rummaging around (my term for following a Google search through several places looking for something) in my quest to comment on this excellent post by Gary Gross on government mandates. It relates to the post just below -- mandates create rents for some people and deadweight costs born by society. I came upon this from Art Carden:
I came across a great quote from C.S. Lewis yesterday that summarizes my views on the modern state: "Aristotle said that some people were only fit to be slaves. I do not contradict him. But I reject slavery because I see no men fit to be masters." I would rephrase this as follows: "Many people say that some people are so irresponsible or evil that they require the state's regulation, oversight, and direction, but I reject statism because I see no men (or women) fit to be their masters."
Gary (by email) points me to a report from the Council on Affordable Health Insurance that shows 50 states having 2133 different mandated benefits and providers. In Minnesota that comes out to 38 benefits every health insurance plan must provide, 21 types of providers that must be covered, and nine separate categories of individuals that must be provided for in a plan. Multiply this by 50 and you have an astronomical number of combinations possible. Who will decide which of these will be the mandate that goes in to a federal plan? Leave out my genuine concerns over coercion, and there's still a huge problem, Carden argues:
...any proposal for intervention has to overcome the knowledge problem. Hayek showed that even under the best of circumstances, the absence of profits, losses, and prices means that no government official can know whether they are creating value or wasting resources.
Hayek wrote that no central planner can get access to the information that is needed, and that the price system gets you information from the "man on the spot". To date nobody has found a system that can duplicate that feat. Maybe Congress will discover it this time, but are you willing to bet your health on it?

Labels: ,