Trial and Error

Wednesday, December 9th, 2009

Atul Gawande says something that Arnold Kling believes to be true — that transforming healthcare will require trial and error — and something he believes to be false — that we have no choice but to rely on government:

Gawande has no concept of the relative ability of government and markets to deal with ambiguity. He thinks that markets are unable to adopt new processes without government pressure. He thinks that government is well equipped to experiment.

There indeed are examples of markets that do not evolve effectively. There are examples of government-led experiments that pay off. But mostly it is the other way around. The incentives work much better in markets. In markets, the tendency is to reward success and to punish failure. In government, failed programs persist, and success receives no special reward.

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