Last week FREE hosted a program for federal judges and law professors, “Personal Health Care Choices and Public Policy.” The speakers included some of America’s most well-known, seasoned, and respected analysts. All are PhDs and MDs from top places including Columbia, Harvard, Hopkins, MIT, and Yale. (Please contact FREE’s office for a list of speakers, along with conference agenda and lecture titles.)

Few people are interested in the analysis of health policy; most care only about outcomes. I recently had a revealing demonstration of this when undergoing a successful operation in Baltimore, MD.

Due to a scheduling delay, I had time for a conversation with my anesthesiologist in the pre-op room. She was quite attentive, articulate, attractive, and athletic—she loves to ski Big Sky. Surely she is a highly competent MD—but she was absolutely uninformed about health care policy. She knew one thing: reform is needed.

Despite her obvious intelligence and occupation, she had neither practical reason nor intellectual incentive to ponder policy. So she had not and didn’t care to.

Surely no sane person is indifferent about health care, especially her own. Health care represents one sixth of our economy. It is complex on multiple dimensions: biology, bureaucracy, budgeting, and a host of others. They interact in indeterminate, mysterious, and often counterintuitive ways. And in every advanced nation public policy has a huge impact on quality, quantity, and technical advancement. Except in some libertarian fantasy world, it cannot be otherwise.

Here’s a great mystery of the world; why do otherwise intelligent and observant individuals believe that large dynamic systems involving self-interested, calculating individuals can be planned to achieve stated goals? How can they take a mechanical rather than an ecological approach to health care? To do so they must ignore philosophy, logic, and experience.

No central authority can possibly figure out an optimal path to achieve good health care, even in a small, poor, and homogenous society. It’s far more difficult in every large, wealthy, and diverse nation. Health care competes for resources with other things people value and there is no obvious way to balance disparate demands and various, oft-inconsistent ethical positions. It’s no wonder every nation faces a health care crisis.

Consider this from Adam Smith’s 1759 work, The Theory of Moral Sentiments: “The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamored with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it.”

We find a distilled version of this theme some two centuries later in Hayek’s The Fatal Conceit: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

Despite this wisdom and the accumulated experience of failed programs of recent decades, I was not surprised when President Obama made a recess appointment of Donald Berwick, MD to head the U.S. Centers for Medicare and Medicaid Services.

Berwick praises centralized control and socialized medicine. According to the New York Times, he “...has spoken of the need to ration health care and cap spending, [and] has supported efforts to reduce the total supply of high-technology medical and surgical care.” He claims great admiration for the British National Health Service.

Few people in government, and perhaps none in this administration, understand the difficulty, indeed the impossibility, of coordinating complex systems from a central position. The central insight in Hayek’s great American Economic Review article of 1945, “The Use of Knowledge in Society,” goes missing. Hayek wrote: “[T]he problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. ... Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.”

Whatever else it is, health care is scarce, an economic good. As its various steps are adopted, I predict the great majority of citizens will judge the Obama Health Care plan an expensive, unjust, inefficient, and unnecessary failure. Then people will seek reforms based on realistic assumptions. Here is one of several complementary approaches.

John Goodman, president of National Center for Policy Analysis, makes the obvious point that 300 million patients and 900,000 doctors can better control costs than Washington bureaucrats. He proposes these steps to reform: (1) Let patients manage more of their own care and have direct control over health care payments, (2) encourage providers to compete for patients based on price and quality, and (3) let doctors have the freedom to provide different services (e.g., telephone and email consultation) and be paid differently as long as (a) total costs are reduced and (b) quality of care increases.

In health care as in other sectors of our economy, decisions are based on information and incentives. The system Obama Care was to reform was marked by highly distorted information and grossly perverse incentives. Unfortunately, many interests are threatened by corrections. Others are paralyzed by an obsolete ideology. FREE’s conference helped us understand the problems of reform and suggested constructive possibilities.

I have intelligent, generally well-informed friends who initially favored various versions of Obama Care. They put hopes and expectations in the same basket. I am hopeful that our impending experiences will change their naïve beliefs in centralized approaches to such complex social systems as health care.