Kill the Beast! Kill It!

Posted on May 29, 2014 by


I keep reading more accounts of the Veterans Affairs hospital scandals and the proposed solutions, and I am about to tear my hair out (sorry, no “trigger warning” there for the violence).  One commentator has suggested the the VA hospital system be abolished and veterans be given vouchers to “regular” hospitals.  That is a very good, even excellent, idea.  But we are missing the bigger lesson.  I said it before and I repeat it:  This scandal is no more that the natural or “normal” operation of huge bureaucracies operating with really, really stupid rules that create perverse incentives that can be exploited by any self-interested employee.  This is true for any large, centralized bureaucracy.  We must begin to understand this.  Since the beginning of the twentieth century we have been bombarded with the idea that “experts’ in rule-bound bureaucratic environments will always have our good in mind, public servants to the last.  This is nothing more than a utopian vision out of the Progressive Era.  If trouble arises, just replace the head of the agency and all will be well. Perhaps we might reorganize the agency a bit.  Perhaps we might add or subtract layers.  We definitely want to make it harder to fire these fine public servants because otherwise they might be influenced by politics–what, they are already, you say?  I am shocked.  

The solution is to recognize that humans are not quite the angels bureaucracy lovers seem to think they are.  And then think about how to reduce the size and existence of bureaucratic institutions.  We might (horror of horrors) eliminate some altogether and allow the private sector to provide the service.  Not that private sector employees are morally better, but that they work under a different, less perverse, set of accountable constraints and that their output can be measured.  We might break the power of public sector unions which protect these bad actors.  We could at least decentralize.  But ultimately I am convinced it all goes back to the nature of human beings.  If we begin with a sober view of what we are, we might design our institutions differently, to minimize the possibility of bad behavior and to punish it when it occurs.  And proper institutional design can also make provision of services more responsive to consumer demands.  It isn’t about new agency heads, or directors, or reorganizations, or more rules, etc.  It is about creating the right incentives that constrain the potentially bad people’s actions and make possible the virtuous acts.  Perhaps someone should have been thinking about the veteran-consumers of health services, but you see, there was  no one around with sufficient incentive to do that, except the few whistleblowers.  So for the time-being, thank the Lord for whistleblowers–and when the government says it is there to help you, do what Ronald Reagan said to do, turn around and run the other way.