Government matters

My former colleague takes me to task for making fun of the government:

One of Megan McArdle's correspondents rants against the evils of the DC Department of Motor Vehicles before snarking " I can't wait for the government to take over our healthcare system."

A common enough sentiment. But look -- the government already runs a fleet of air craft carriers. Worse! The government's taken over our national monetary policy -- mistakes can plunge the country into recession or a destructive cycle of inflation. And as if that's not enough, they run a vast arsenal of nuclear warheads capable of destroying the entire planet. Which is just to say that if it's not conceivable that there could be a well-managed government agency, then we're all doomed irrespective of what happens with health care. But in fact if you look across the country or around the world, you see some highly effective public agencies and some highly dysfunctional ones. Obviously, you wouldn't want the health care system run like the worst of those agencies, but that's hardly to say that a highly effective government health care agency would be impossible to achieve.

This strikes me as odd because I wouldn't have thought it a particularly controversial proposition that the military is not a particularly effective organization.  The US military is indisputably the most effective military in the world.  But militaries are not very effective.  At any of the tasks the military does which are comparable to a private organization, it performs worse than top-notch private organizations; it is not as good at logistics as Wal-Mart, as good at food service as McDonalds, etc.  Military procurement is expensive and insanely inefficient.  This is the nature of the beast; governments have all sorts of rules that are designed to achieve goals other than effectiveness.

Pointing out that the government does this very important job is not a "gotcha" to libertarians, who think that the government should run the military, and a few other things, because they're true "public goods": things that provide a large, and more importantly, non-excludable, public benefit.  Healthcare spending, outside of a few categories such as vaccination, does not provide such a benefit; almost all of the benefit of modern healthcare spending is captured by the person to whom it is provided.

My quarrel with government-funded healthcare is not that I think that they are so incompetent that they will kill all the patients; it's that I think they will do a substantially worse job than the private sector at many important components of healthcare, particularly innovation.  The nuclear analogy is a great soundbyte, but like most soundbytes, on closer examination it doesn't actually make much sense.  Management can fail in lots of ways, only one of which results in the accidental release of all our nuclear warheads.  The rest just incur other costs, like fiscal expense and slower innovation.  On matters such as management of the nuclear arsenal, I'm not really lying awake at nights wondering whether we're spending too much or using too many personnel, or whether our warheads are really the very best they can be.   But when something consumes 16% of our GDP and every innovation saves lives, you kind of have to start thinking about those things.