31 thoughts on “The Knowledge Problem”

  1. Or perhaps Obama did read Hayek, like where Hayek said “Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance – where, in short, we deal with genuinely insurable risks – the case for the state’s helping to organize a comprehensive system of social insurance is very strong… Wherever communal action can mitigate disasters against which the individual can neither attempt to guard himself nor make the provision for the consequences, such communal action should undoubtedly be taken,” – The Road To Serfdom (Chapter 9).

    1. Hey blind one, did you comprehend the part in the middle of your quote:

      “… neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance …

      Didn’t think so.

    2. Hayek’s The Constitution of Liberty:

      “The conception that there is a an objectively determinable standard of medical services which can and ought to be provided for all, a conception which underlies the Beveridge scheme and the whole British National Health Service, has no relation to reality.”

      There’s so much more from Hayek on this subject. If you want more quotes, they can be provided, but the better thing is to actually read Hayek and not Politico. If you can’t afford to purchase the book via Amazon (use Rand’s link!) from The University of Chicago Press (yes, they are the publishers, and they want a lot of money for the book); then you can download the book from Scribd (provided by the China Social Sciences Publishing House, I kid you not).

      2. The British NHS is a state-run system of hospitals. Obamacare is a privately-ran collection of providers, getting funded by private insurance. The only part of the US system comperable to the NHS is the VA system.

      3. So Gerrib, you are saying you’re against the NHS system? Or are you just suggesting that Obamacare is better because it is a government mandate that individuals give money to private corporations for their well-being?

        1. I’m neither for nor against NHS, although every Brit I’ve run across seems to like it. I’m merely saying comparing NHS to Obamacare is comparing apples to tangerines.

        2. So, you are trying to change the topic but bringing up an irrelevant point. Hayek doesn’t support your view nor those any Brit you seem to run across. I provided the correct quote to prove that point. Now you want to discuss the differences between NHS and Obamacare. Ok…

          Back to the road the serfdom, Gerrib makes this claim:
          “Obamacare is a privately-ran collection of providers, getting funded by private insurance.”

          Prior to Obamacare, we had privately providers funded by both private insurance and those who had other means to pay. What we have now is a mandate that everyone get insurance. When a totaltarian state demands its subjects do something they rather not do for the improvement of others lives; then that is the serfdom Hayek warned would occur.

          1. So when Hayek says ” the case for the state’s helping to organize a comprehensive system of social insurance is very strong,” that’s somehow not an endorsement of creating a comprehensive system of social insurance?

            How is it “changing the subject” to, when you quote Hayek on a specific plan (the NHS) for me to say that Obamacare is not the same as NHS?

            This is not Alice in Wonderland. Words don’t get to change their meaning because you think they should.

          2. In my readings of Hayek, and indeed the title of one of his books, when a totaltarian society demands that its people give their money, time, labor to others for the good of others, that is serfdom. Your previous description of Obamacare:

            “Obamacare is a privately-ran collection of providers, getting funded by private insurance.”

            That is serfdom. The fact that you want to argue that Obamacare isn’t the NHS, doesn’t mean Obamacare isn’t what Hayek was arguing against. For instance, here’s what Hayek says:

            We constantly take risks and decide on the basis of economic considerations whether a particular precaution is worthwhile, i.e., by balancing the risk against other needs. Even the richest man will normally not do all that medical knowledge makes possible to preserve his health, perhaps because other concerns compete for his time and energy. Somebody must always decide whether an additional effort and additional outlay of resources are called for. The real issue is whether the individual concerned is to have a say and be able, by an additional sacrifice, to get more attention or whether this decision is to be made for him by somebody else.

            Obamacare requires the individual to make an additional sacrifice and outlay resources for medical care, even if that is not what the individual wants to do. That’s a loss of individual freedom. It is serfdom.

            You can trumpet the differences between Obamacare and NHS. You can claim Obamacare makes compromises to appeal to libertarians. The reality is Obamacare is no compromise with liberty. It is a loss of liberty. It is serfdom.

  2. “Il Dufe” certainly read THE ROASD TO SERFDOM. Like Chris Gerrib, however, he enjoyed it as a how-to book rather than a warning.

  3. I still haven’t read it, but the following link makes it sound like a good read:

    In his 1944 book, “The Road to Serfdom,” Hayek declared that any civilized nation should guarantee minimum living standards for its citizens — including universal health care, pensions, relief for the poor and a roof over everyone’s head.

    Reading Hayek’s book, Keynes leapt on this key concession. […]


    Read more: http://www.politico.com/news/stories/1211/69745.html

  4. Chris and Bob, you would both enjoy the road to serfdom. In it Hayek is arguing from the center-left against the far left, explaining why socialism as then conceived inevitably leads directly to Nazism or Fascism. His book was influential for convincing most serious Western European socialists that their story ends with “… of course it didn’t work and everybody died.” But in the book he was conceding a center-left position, surrounded by a sea of statist governments with central planning all the rage.

    The post in question, though, concerns Hayek’s work on the knowledge problem, that no centralized bureaucracy can conceivably make all the necessary decisions that a dispersed system can. There’s no way to gather the required information, as it consists of almost everything individually known by everyone in society. It’s like trying to amass the whole of human experience and put it in a database, updated hourly as people go through the day. So Obamacare is soon going to require such a system, and the people charged with implementing it on the legal and IT ends are realizing that it’s going to fail – spectacularly.

    1. George, if this is true, perhaps “Obamacare” was too much of a hybrid.
      Which other free world countries’ universal health care programs require so much knowledge, and which don’t?

      ==

      Aside from the specifics of the USA’s health care reform, there does appear to be some inconsistency between what Hayek wrote, and what opponents of a universal health care system seem to think he wrote. Not necessarily in this post, but in general, reading this blog, one would never know Hayek believed ” any civilized nation should guarantee minimum living standards for its citizens — including universal health care, pensions, relief for the poor and a roof over everyone’s head”. Rather, one would think Hayek believed such things were on-ramps to the road to serfdom!

      1. “Which other free world countries’ universal health care programs require so much knowledge, and which don’t?”

        Which ones do you know of which are not currently buckling under the weight of their internal inconsistencies? Even France is showing strains.

        Of course, you can find all sorts of articles and “studies” which “prove” how inferior our system is. And, it does have problems. But, A) as we have seen in the climate debate, the advocates of government power are none too concerned with honesty and B) it is quite simply not possible to increase demand for something while decreasing supply and have costs to do anything but mushroom, and quality plummet.

        There are ways in which healthcare in America could be improved. Obamacare is just about the exact opposite of any of them.

    2. It’s more than having comprehensive knowledge. In theory, in the age of computers, it should be possible to compile all necessary knowledge.

      It’s more than having accurate knowledge. Inaccurate knowledge can be ameliorated with adequate filtering, as long as the corruption does not go too deep.

      But, it also must be timely knowledge, and this is even theoretically impossible in a causal universe – events in general cannot be known before they have occurred.

      As every good controls engineer worth his salt knows, feedback delays in distributed parameter systems, generally as a result of non-colocation of sensors and actuators, almost always result in non-minimum phase response. And, there are rigorous theorems which prove it is impossible to stabilize a plant with bandwidth greater than the lowest non-minimum phase zero. Ergo, the best performance that can be expected while maintaining stability is low bandwidth, i.e., sluggish and unresponsive. If there is a non-minimum phase pole, then stability demands that the bandwidth be greater than it. Thus, it is entirely possible to have a system which is completely unstabilizable by any means in a given configuration, when there is an NMP zero below an NMP pole.

      In summary, the best you can hope to do is stabilize the system at a relatively low level of activity. But, it may well be that it is completely unstabilizable,

  5. Except Obamacare does not require a “centralized bureaucracy” that makes all decisions. It sets up 50 state exchanges in which people buy private insurance, and it provides some rules so that mere mortals, as opposed to insurance experts, can compare the plans. All the key health care decisions, from what insurance to buy to what treatment plan to pursue, remain decentralized.

    1. Hmm, and even that part of Obamacare is heading towards a train wreck. Due to the myriad of requirements for Medicare and Medicaid eligibility at both the State and Local level it is proving to complex for the states to have their exchange up and running by 2013. And where those states that unable (or don’t want to) setup their own exchange the federal government is supposed to step in. Only problem is the Dept. of Health and Human services says they are terrified of this prospect and will not themselves be ready in time for the deadline. This whole thing is a cobbled together piece of crap.

  6. Ignore for a moment that it is unconstitutional… Obamacare is adverse selection writ large; a part of the knowledge problem. It forces inefficiency which seems to be the common theme of all marxist juvenile reason.

    We have a method for dealing with the uncommon problems; it’s called the local community. I haven’t had good insurance in thirty years and it’s all because of social engineering.

      1. Because the vast majority of young adults don’t actually need it, or at least don’t need anything more than catastrophic coverage. To attract them, premiums for them have to be kept pretty low, enough to cover their lower risk and little more. But if the government makes it mandatory for all of them to carry coverage, and since the government gets to set coverage standards, all those young people won’t have cheaper policies as an option. So their newly inflated premiums will go into the vast bureaucracy to cover older folks, a transfer of wealth from the young and struggling to the rich and established.

        Or look at it another way. People spend their own money with vastly more wisdom than they spend other people’s money. If each of us paid our health care costs in cash out of pocket, we would be far more likely to carefully weigh the need for each expensive test or treatment suggested by the doctor, offsetting the potential benefits of the test against other things we could spend the money on. Admittedly, health care is one of the more difficult areas for rational, personal deecision making, since illness and death suck so much, but in many cases we would make smarter decisions.

        For example, you would be much less likely to go to the emergency room for a minor cut or poison ivy if you knew it was going to cost you a couple hundred dollars out of pocket, and you’d instead go to the grocery store for some band-aids and calamine lotion. But if you have some big insurance plan where such visits cost you nothing (since they don’t affect your premiums), you’ll sit in the ER waiting room with all the other people who have cuts and rashes.

        But the inefficiencies get worse. Instead of slapping your cash down on the counter after your 15 minute doctor visit, you spend 45 minutes doing paperwork and then other people at the hospital and the insurance company spend 30 minutes doing paperwork. You’ve gone from a quick trip to the grocery store (where you also bought milk and eggs), to 30 man-minutes with the doctor (after an hour in the waiting room), followed by 105 man-minutes of paperwork. From a labor standpoint, you’ve gone from 5 man-minutes to find the band-aids in the first-aid aisle to about 200 man-minutes because treatment was “free.”

        Regarding a single-payer system, it sounds so simple. Why don’t we use the same concept for food? Everyone pays extra tax dollars to a centralized food bureaucracy, which in turn pays the grocery stores. All the groceries are then free, and we don’t have to bother putting prices on everything or standing in lines at the checkout. Rich and poor have equal access to proper nutrition! Hunger is eliminated! Fairness!

        But as communism taught us, the reality would be that everyone spends their day standing in line for bread at a bakery that doesn’t have any bread.

        1. Except under the law, insurers must spend 80% of the premium on health care or refund a portion of the premium to make up the difference. So the young adult, who most definitely needs an insurance package, will still get a low-cost one.

          Regarding emergency rooms – the reason people currently go to emergency rooms for trivial stuff is because they don’t have insurance, and know they won’t get turned away. If you have insurance, you go to your doctor, or one of those urgent care clinics, because they will get you in and out faster.

          Since we’re not implementing single-payer, your remarks on that are irrelevant.

          1. Except under the law, insurers must spend 80% of the premium on health care or refund a portion of the premium to make up the difference. So the young adult, who most definitely needs an insurance package, will still get a low-cost one.

            More ignorance or deception on your part; I don’t really care which at this late hour. The MLR provision is per insurer, not insured. The young and healthy will absolutely pay more than they do now because the preimums for the old/infirmed and poor will be capped by preimum ratios or FPL maximums, respectively. The whole point of Obamacare is this built-in cross-subsidization. Without that, it’s essentially what we have right now.

  7. Trust Gerrib to read Hayek and come away quoting the one of the few invalid things Hayek wrote. All that warning about the dangers of Ominpotent Government? Whooosh–right over Gerrib’s head.

        1. The quote, again, is: “Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance – where, in short, we deal with genuinely insurable risks – the case for the state’s helping to organize a comprehensive system of social insurance is very strong… Wherever communal action can mitigate disasters against which the individual can neither attempt to guard himself nor make the provision for the consequences, such communal action should undoubtedly be taken,” – The Road To Serfdom (Chapter 9).”

          1. And that’s one of the difficulties Hayek had in writing “The Road to Serfdom”. He took a position that’s hard to distinguish from the position he’s attacking. As I mentioned before, he’s defending the center-left against the far-left, illustrating how many well-meaning policies, if taken a little farther, lead directly to Nazism and Fascism. He made his case that socialism leads directly to everything socialists claim to despise, but didn’t really offer alternatives to the socialist policies that everyone assumed were naturally good ideas.

            He was writing at a time when the political winds said “If some state planning and centralized bureaucracy are good, more state planning and centralized bureaucracy must be better.” He soundly refuted that notion, but in the book didn’t go back to examine whether the first premise was true or not. He just accepted it as a given.

            BTW, you can download “The Road to Serfdom” as a PDF, even as the Reader’s Digest condensed version.

  8. George Turner nailed it. Read for comprehension, Chris, you have not addressed any of his points. Read it slowly Chris.

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