Men of System Systematically Misunderstand Spontaneous Orders

by Don Boudreaux on July 22, 2009

in Complexity & Emergence, Health

Division of Labour’s Frank Stephenson makes a great point:

We hear lots of chatter about reforming the health care system, but I think using the word system plays into the hands of statists and planners (men of the system in the words of the great one) by giving the impression that the provision of health care services is something that can be directed via central planning. We don’t speak of the grocery system or the clothing system, so why refer to health care as a system?
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{ 50 comments }

BoscoH July 22, 2009 at 11:00 am

But if it's not centrally planned and directed, how do doctors know what to do? Maybe George could weigh in.

Mark Tele July 22, 2009 at 11:02 am

And always beware of politicians talking about their healthcare "plans", because their plans are guaranteed to be at odds with the plans you have for your life!

Bottom line: whenever you hear politicians mention "system" or "plan", hold on to your wallet and run for your life!

Sam Grove July 22, 2009 at 11:09 am

System is their very paradigm for comprehending the world. The fewer (systems) the better.

Greg Ransom July 22, 2009 at 11:12 am

Great point.

I'd noticed this problem also.

If classical liberals want to win, they first must take back the language.

It's that simple.

andrew July 22, 2009 at 11:32 am

Can the same argument be made when referring to capitalist and socialist "systems?". After all, the differences are really degrees of attempted control and planning. The underlying economic reality is still the same.

K Ackermann July 22, 2009 at 11:35 am

And why do we always have to buy a pair of pants?

Why not just one pant?

Methinks July 22, 2009 at 11:52 am

Whutevah! All I want to know is where my free medicine be at! I voted for Obama and I'm still waiting for my free sh** that he promised me for being the victim of not having a job and ten kids.

I don't think the electorate really grasps such subtleties. There is, in fact, a system because there is nothing that resembles a free market in health care. Doctors are either in network or not. Everything is regulated to within an inch of its life such that we already have a top down, planned system. Thus, everyone already thinks of it as a single system. Saying that we're going to scrap this system without replacing it with another system makes people feel very nervous because there is no plan and we've now trained generations of Americans to depend on and expect others to make plans for them instead of planning and thinking for themselves. No wonder the American Nomenklatura treats Americans like serfs. They think like serfs.

Jame Howe July 22, 2009 at 12:05 pm

Methinks has a good point. I think a similar thought process would apply to the 'Educational System'. Education, like 'health care' has large components of central planning and therefore constitutes a 'system'.

John Galt July 22, 2009 at 12:10 pm

It is being directed via central planning.

That much is painfully obvious.

Daniel Kuehn July 22, 2009 at 12:35 pm

Methinks -
RE: "Doctors are either in network or not"

I agree this is a "system" of sorts, but how are provider networks not free market?

LowcountryJoe July 22, 2009 at 12:36 pm

Maybe George could weigh in.

Yes, the good ducktor and some Kuehn insight is what is desperately needed.

Methinks July 22, 2009 at 12:47 pm

Dan,

the network comment re-enforces the system perception among consumers. The regulations in healthcare make it a top down,system.

Methinks July 22, 2009 at 12:54 pm

"the network comment re-enforces the system perception among consumers."

Clear as mud.

Should have said "the network re-enforces the perception of a top down system among consumers."

That perception is re-enforced when people realize that the number and type of provider networks as well as the type and cost of insurance is is regulated entirely by the state. Even if they don't realize it's controlled by the state, they see insurance companies denying them the product they want as a conspiracy against them. Some understand that the state of Virginia just made pregnancy riders illegal to write, but regardless of who they think is doing the planning, they view it as a planned system.

Daniel Kuehn July 22, 2009 at 12:58 pm

Methinks -
Well I get the regulation argument, but I suppose I don't see what's wrong with recognizing a system as a system, and perhaps I should have asked "what's so anti-market about a system?" Provider networks and private insurance – regulation aside – is a market. And it's a system. Yes they're regulated, but you can imagine a theoretical unregulated HMO that also has a provider network and is also a "system". So? I guess I just don't see the cogency of the concern about the language that's used. I suppose I'm just coming at this from a Coasian, boundaries of the firm perspective. There will be systems and there will be planning and there will be central control in a market setting, even before considering the case of government. The market isn't always atomized.

Dennis Gildea July 22, 2009 at 1:12 pm

I think the real rhetorical trick is naming the "system" in a way that supports the speaker's conclusion.

A true "system" consists of a number of components — lots of people with many different plans and incentives. In the case of "healthcare" there are creators of products, distributors of products, people who employ the products, and consumers of products (and lots of others). Some are looking for better health, some for wages, some for investment returns.

Calling it "the healthcare system" focuses only on consumers. From Merck's point of view, for example, it might better be called the pharmaceutical development system. Choosing to give name recognition to only one component of the system enables the speaker to tacitly assume that the other parts of the "system" are relatively insignificant. This makes it easier to conclude that consumption of healthcare can be controlled without significant effect on its production, distribution, etc.

Sam Grove July 22, 2009 at 1:16 pm

the health care system

The issue is not the word "system", the issue is with the use of "the".

THE health care system.

Singular; gives the impression of a unitary arrangement created and/or managed by a unitary authority.

Methinks July 22, 2009 at 1:20 pm

Dan,

Thanks for another post where you go completely off topic, laser focus on a microscopic, irrelevant spec in an effort to blow it completely out of proportion and divert the entire comment section into a long and pointless debate about systems within systems and systems within free markets, ad nauseum. I think everyone understands that every company, even if unregulated has certain rules and a specific plan it offers its customers and everyone understands that this is a "system" and a "plan" without reading 48 lengthy posts on the subject. I don't have the energy for picking that much lint from every crevice of my naval today. Sorry.

Yes they're regulated, but you can imagine a theoretical unregulated HMO that also has a provider network and is also a "system"

Yep. Missed my point. Go back and try again.

Methinks July 22, 2009 at 1:22 pm

Good point, Sam.

Daniel Kuehn July 22, 2009 at 1:34 pm

Methinks -
RE: "Thanks for another post where you go completely off topic, laser focus on a microscopic, irrelevant spec in an effort to blow it completely out of proportion and divert the entire comment section into a long and… [etc. etc. - continued long and pointless discussion]"

I made two posts that are far less lengthy than yours simply saying "markets produce systems, I don't see why 'system' implies central planning or is a word that should be shunned". Which is… if I read his post correctly… EXACTLY the subject that Don was talking about. My whole point of talking about provider networks with you was precisely that markets lead to planning and systems. How could I make that point without referencing your discussion of provider networks and the market? If you have a better way for me to make that point – let me know. If you don't, please get off my back.

K Ackermann July 22, 2009 at 1:42 pm

I think they call it a system because it is set up to bilk customers.

It should be called the health care racket.

The Solar System July 22, 2009 at 2:30 pm

Prof. Boudreaux, I love your blog but I think you're stretching this one. My friends The Central Nervous, The Operating, and Global Positioning agree.

Paul Roscelli July 22, 2009 at 2:34 pm

In the mid-1960s Medicaid spending was projected, by the Govt, to be 9 billion by 1990. The actual 1990 burden? 65 Billion. The government missed the mark by seven fold.That's like contracting with contractor to build a house for $700,000 and being told that the actual bill is over 5 million

What else do you need to know?

PR

PS. these numbers come straight from the textbook: Health Economics & Policy by James Henderson, SouthWestern Publishing copyright 199

John Dewey July 22, 2009 at 2:36 pm

methinks: "There is, in fact, a system because there is nothing that resembles a free market in health care. Doctors are either in network or not."

As I'm sure you know, I agree with you many more times than I agree with Mr. Kuehn.

In this case, I completely agree that the U.S. health care market is not a free market. But your next sentence bothers me a bit.

I have no problem with private 3rd party payment for health care, and the concept of in-network providers. Some who comment here have argued that private 3rd party providers distort the market just as Medicare does. This argument I do not understand. The contracts insurance companies make with health care providers and with the insured just do not seem to be a problem.

If you're disinterested in this question, I certainly understand. But I would appreciate if you made the distinction between government interference and private third party payment.

JohnK July 22, 2009 at 3:12 pm

If classical liberals want to win, they first must take back the language.

Ain't that the truth.

The proponents of positive rights have twisted the language to the point where you are a greedy meanie if you wish to deny that to which someone else is entitled, rather than showing righteous indignation at being forced to pay for something that you don't want in the first place.

John Dewey July 22, 2009 at 3:17 pm

daniel kuehn: '"markets produce systems, I don't see why 'system' implies central planning or is a word that should be shunned".

Daniel, I did not read where Frank Stepehnson questioned the use of the plural word "systems" in describing the provision of health in the U.S. I think his objection was to the singular word "system".

Do you understand how a simple letter can change the meaning of an argument?

Methinks July 22, 2009 at 3:20 pm

In this case, I completely agree that the U.S. health care market is not a free market. But your next sentence bothers me a bit.

Well, John, if you're confused, then I might owe an apology to DK. The fault seems to be mine.

To be clear, I have no problem with any plan offered by a private company and entered into without coercion by the participants in the plan whether that plan includes a network of doctors or not. I don't even have a problem with publicly funded basic health care for the indigent.

What I means is that the use of the word "system" with regard to healthcare seems natural to people in some part (how much is debatable) because words related to systems like "plan" and "network" psychologically effect the way healthcare provisioning is viewed. I really did not mean for that one comment to be the central focus nor did I mean my comment to be a criticism of provider networks.

I_am_a_lead_pencil July 22, 2009 at 4:09 pm

Having an objection to the word "system" in a political context does not suggest its inappropriateness to describe markets so I think Stephenson actually misses the mark.

The market itself, as Hayek referred to it is:

"…a purely abstract system of rules that merely secures coordination without enforcing upon us common goals or common aims."

The trouble with using the term "system" in a political context is that it does imply an enforcement of "common goals or common aims." A political "fix" to any market "system" must, by definition, be one involving the enforcement of rules to reach a common end rather than obeying abstract rules which are end-independent e.g. market ethics.

muirgeo July 22, 2009 at 4:30 pm

But if it's not centrally planned and directed, how do doctors know what to do? Maybe George could weigh in.

Posted by: BoscoH

The idea that our medical care is result of spontaneous order is absurd to the point that I care not to comment.

This degree of faith in spontaneouss order is nothing but a religion.

It's on the order of the level of debate we see the Republicans using to argue against public option plans for healthcare. They say they are not fair because the private plans couldn't compete with the public plans. Just amazingly laughable.

Daniel Kuehn July 22, 2009 at 4:32 pm

Methinks –
I don't think it was the central focus at all. And like John Dewey, I agreed with the rest of your post at least analytically (if not philosophically).

One of the issues that dominates this blog whenever health care comes up is the question of whether third-party payment itself is a problem. I think THAT'S why your point raised eyebrows with John Dewey and I.

And personally, I don't think that question is a sideshow consideration anyway. I've been incredibly intrigued at the diversity of opinion on the question that's come up on this blog. I would have guessed there would be more uniform comfort with third party payment. It's clearly a market mechanism (you, me, and John seem to agree on that), and yet it might be the only market mechanism that I've seen the hosts identify as a "market failure" of sorts (although granted they didn't use those words). And of course, the third-party payment question is also interesting because it cuts across issues of "public" and "private" insurers. So far from being nit-picky, I've always thought that point about provider networks/employee benefits, and the whole range of "third party" questions has been one of the most interesting, and oddly the most persistent questions about health care on Cafe Hayek.

Daniel Kuehn July 22, 2009 at 4:33 pm

methinks -
btw… that was a peace offering and statement of why it was such an intriguing point of yours to think about, not a protracted argument ;-)

Daniel Kuehn July 22, 2009 at 4:43 pm

muirgeo -

RE: "The idea that our medical care is result of spontaneous order is absurd to the point that I care not to comment. "

I think you've gotta dig a little deeper than that.

Do you mean that there's a large degree of private sector bureaucracy and hierarchical decision making that constrains the interaction between patients and their doctor? OK – fine. But that hierarchy and bureaucracy still emerged spontaneously out of a private market that demanded insurance as a form of compensation and also exhibited steadily growing demand for health care in general, especially at the end of life.

So a system? Yes. That's the point I was making. Private? Sure. Spontaneous? Largely that as well. Remember the lessons of "the Nature of the Firm". We shouldn't assume inefficiency, the absence of markets, or the absence of spontenaity every time we see "systems" and "hierarchy" – and that is really as much a statement for people jumping on the public plan bandwagon as it is for anyone else.

S Andrews July 22, 2009 at 4:43 pm

The idea that our medical care is result of spontaneous order is absurd to the point that I care not to comment.

That's because you have a comprehension issue. Most of the people I read here are arguing the opposite. In other words, our health care is a mess exactly because it is planned. The part that works is purely because it is allowed a small amount of spontaneous order.

They say they are not fair because the private plans couldn't compete with the public plans. Just amazingly laughable.

That's because you belong in a mental institution.

Methinks July 22, 2009 at 5:05 pm

Dan,

Thanks, but we are not at war, so no peace offerings required. Plus, the more I think about it the less intriguing that particular point seems to me. In fact, I'm starting to think it's not very intriguing at all.

But that hierarchy and bureaucracy still emerged spontaneously out of a private market that demanded insurance as a form of compensation and also exhibited steadily growing demand for health care in general, especially at the end of life.

Not quite.

Private health insurance emerged spontaneously hundreds of years agot, but its present form and bureaucracy bears the pawprint of the heavy had of government.

As far back as at least 1929, some health insurance was subsidized. In response to government imposed wage controls, employers began offering health insurance as an added compensation (as it did not count as a "wage" – government is so stupid). In order to encourage this behaviour, government offered tax breaks on the provision of health insurance. In 1965 came medicare and medicaid. Along the way, regulators shaped and meddled with the product. To call the current system "spontaneous order" is a little more than inaccurate.

Seth July 22, 2009 at 5:15 pm

Good point. I agree.

John Dewey July 22, 2009 at 5:40 pm

methinks,

I agree that wartime wage controls in the 1940's accelerated the growth of employer-based health insurance. But Blue Cross/Blue Shield was successfully offerring group health insurance throughout the 1930's. The industry was apparently growing without government intervention or direction.

"Several large life insurance companies entered the health insurance field in the 1930’s and 1940’s as the popularity of health insurance increased. In 1932 nonprofit organizations called Blue Cross or Blue Shield first offered group health plans. Blue Cross and Blue Shield Plans were successful because they involved discounted contracts negotiated with doctors and hospitals. In return for promises of increased volume and prompt payment, providers gave discounts to the Blue Cross and Shield plans."

We cannot know whether employees would have taken advantage of the group buying power of their employers had this benefit not been shielded from taxation.

Methinks July 22, 2009 at 6:21 pm

John Dewey,

Blue Cross Blue Shield was offering group insurance before the war and employers also offered health insurance to employees before the war without government direction, but I think there was some intervention. I believe insurance regulation existed at the time.

We cannot know whether employees would have taken advantage of the group buying power of their employers had this benefit not been shielded from taxation.

Why not? Group health insurance was growing in popularity before the tax exemption. Plus, group buying power made health insurance cheaper. Why wouldn't they take advantage?

Also, why are employers the only possible group? Without the tax exemption, other groups could have formed and negotiated insurance terms for their members. It's illogical to me to think that employment and health insurance are somehow more natural than a 10,000 sole proprietors grouped together.

Dr. T July 22, 2009 at 6:38 pm

People in health care do refer to a "health care system." But, it is not a clear-cut, well-defined system such as a solar system or circulatory system. Our current health care system has two major aspects: clinical and financial. Each aspect is a conglomeration of components derived from free market principles, corporatism, government regulations, corporate regulations, and government control. The ratios of these components vary significantly by state and to a lesser extent by locality.

Our health care system is incredibly complex and markedly inefficient. The best way to fix such a system is to simplify. Obama and his allies want to simplify by eliminating the free market and corporate components. What Obama and allies don't want people to recognize is that government itself is a complex system. Our health care system won't be greatly simplified if it is 100% comprised of government control and government regulations. The Libertarian method for simplifying the health care system eliminates the government and corporatism components. But, since government and corporations have vastly more power, we know what the outcome will be.

muirgeo July 22, 2009 at 6:40 pm

"The idea that our medical care is result of spontaneous order is absurd to the point that I care not to comment."
me

That's because you have a comprehension issue.

S Andrews

Yes that was poorly stated. But I knew what I meant…

The idea that comprhensive medical care could results from markets forces alone similiar to how apples are sold on the market is absurd.

Without planning from the CDC, local public health, FDA and publically funded research advances helping to spur new technologies we'd have a much more difficult job. Market based medicine exist no where in the free world and the belief that it could be effective as markets are in selling apples on a cart is simply a faith-based claim grounded in nothingness.

Emergent order won't end an epidemic or vaccinate a population. Emergent order is for lesser species looking for a dead end… we're planners and that's the key to our success.

Sam Grove July 22, 2009 at 7:27 pm

The idea that comprhensive medical care could results from markets forces alone similiar to how apples are sold on the market is absurd.

And you know this how?

S Andrews July 22, 2009 at 7:29 pm

free world

Let me know which planet this is on.

Emergent order won't vaccinate a population.

Thank God.

we're planners and that's the key to our success.

No Thanks! Keep your plans to yourself. I can plan my own life.

Emergent order is for lesser species looking for a dead end…

Lesser Species…Isn't that what you call other human beings whose life YOU want to plan, instead of treating them like human beings who is capable of planning?

Without planning from the CDC, local public health, FDA and publically funded research advances helping to spur new technologies we'd have a much more difficult job.,

A White American man's life expectancy was 38 in 1850 and it was over 63 in 1946 – the year that a new parasite was introduced into the field of medicine – CDC. Which government planner do you attribute that increase in life expectancy over that 96 years?

FDA was started in 1906 ( life expectancy of a White American man was 11 years/25% higher than 1850 that year ). Which government planner do you attrtibute that improvement in life expectancy to? Considering the fact that it only controlled the interstate commerce of Food at that time, what do you attribute the increase in life expectancy since then?

indiana jim July 22, 2009 at 8:14 pm

Speaking of men of the system, I just watched Robert (Man of the System) Reich debate John Stossel on the Kudlow's TV program. The debate was on Health Care. Stossel made all the Hayekian points, Reich advoacted that we should all roll up our sleeves and pitch in together as we are all in this together as members of a democracy.

Reich will talk out of all three sides of his mouth, Stossel is straightaway for economic freedom and individual choice.

Bottom line: Stossel understands how spontaneous order in the free market delivers more and higher quality products at lower prices, Reich is a quick witted man of the system who either does not understand what Stossel does or is a lying sack of sh**.

indiana jim July 22, 2009 at 8:14 pm

Speaking of men of the system, I just watched Robert (Man of the System) Reich debate John Stossel on the Kudlow's TV program. The debate was on Health Care. Stossel made all the Hayekian points, Reich advoacted that we should all roll up our sleeves and pitch in together as we are all in this together as members of a democracy.

Reich will talk out of all three sides of his mouth, Stossel is straightaway for economic freedom and individual choice.

Bottom line: Stossel understands how spontaneous order in the free market delivers more and higher quality products at lower prices, Reich is a quick witted man of the system who either does not understand what Stossel does or is a lying sack of sh**.

S Andrews July 22, 2009 at 8:17 pm

BTW, there was huge swine flu propaganda back in 1976. 40 million americans were forcefully inoculated that year against swine flu. Only 1 person died for swine flu, rest of the death was due to the vaccination. Isn't it wonderful for those who died, muirgeo?

S Andrews July 22, 2009 at 8:19 pm

BTW, there was government swine flu propaganda back in 1976. 40 million americans were forcefully inoculated against swine flu that year. Only 1 person died of swine flu, rest lost their lives to the vaccination. Inoculation worked beautifully for those who died, isn't it brickhead?

S Andrews July 22, 2009 at 8:20 pm

Oops, I thought I had hit the preview button first time.

Sam Grove July 22, 2009 at 8:38 pm

By spontaneous order, we mean the coordination of the planned and unplanned actions of a multitude of actors via the pricing mechanism.

Libertarians don't object to planning, in fact, I think most libertarians would advise people to plan their lives as they see fit.

The kind of planning we object to is the planning by some of other people's lives.

MWG July 22, 2009 at 9:31 pm

"Reich is a quick witted man of the system…"
-Indiana J.

I actually think Reich is "slow" witted… and a douche…

MWG July 22, 2009 at 9:32 pm

I love Stossel's style… he looks so relaxed when he debates.

Gil July 22, 2009 at 9:44 pm

Do you feel a certain scientific smugness then that in the modern 'Socialist' era the modern Westerner's life expectancy is starting to go downwards, S. Andrews?

indiana jim July 22, 2009 at 11:15 pm

MGW,

His is slow witted like a black mamba.

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