When Costs Outrun Expectations

Avik Roy tells an anecdote that helps explain how the United States got into its current fiscal fix:

For the last half-century, those who have fashioned our health-care policy consensus have struggled to see what is in front of their noses. This is largely because if you’re the guy running the think-tank or the relevant federal agency, it’s all too tempting to believe that you and your fellow experts can do a better job running the health-care system than a blob of unpredictable, anonymous, autonomously-acting individuals.

But those experts have failed, and failed spectacularly. In 1965, government experts projected that in 1990, on an inflation-adjusted basis, Medicare would cost $12 billion. In reality, Medicare in 1990 cost $107 billion. Oops.

Says Peter Suderman: "This is what Arnold Kling means when he talks about expert failure."