Sunday, October 19, 2014

What Economics Can Teach Us About Ebola

Note: Not every alternative suggested in the below article would fall easily under libertarian principles. I am posting this piece because I believe it provides a very good overview of the general differences between detailed government central planning and potential free market options.-RW 

 By John C. Goodman

There are two fundamentally different ways of thinking about complex social systems: the economic approach and the engineering approach.  The thinking about Ebola at the Centers for Disease Control reflects the engineering approach. The behavior of everyone else reflects the economic approach.

Social engineers see society as disorganized, unplanned and inefficient. The solution? Let experts takeover. Social engineers inevitably believe that a plan can work even though everyone who is expected to carry it out has a self-interest in defeating it. Implicitly they assume that incentives don’t matter. Or if they do matter, they don’t matter very much.

Economics is the science of incentives. Almost everything interesting that economists study flows from the fact that people respond to incentives. Complex social systems display unpredictable spontaneous order, with all kinds of unintended consequences of purposeful action. In a good incentive system, however, people find that when they pursue their own interests, they are also meeting the needs of others. Perverse incentives, by contrast, almost always lead to perverse outcomes.

Thomas R. Friedan, director of the CDC, exemplifies the engineering approach. From the beginning of the Ebola scare, Friedan assured us that Ebola was unlikely to get to the United States in the first place; and even if it did, we know how to isolate the victims and keep them away from everyone else. What all this calming rhetoric overlooked was how many people have a direct self-interest in undermining what Friedan described.

By the way, most people in health policy take the engineering approach. That is why there have been so many mistakes and so many failures of policy – ranging from Obamacare to Ebola control.

Read the rest here.

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