January 5, 2014
Economic Systems, North Korea and the ACA
When I speak with people about economics, which happens far more than my wife would prefer, we inevitably use the phrase 'economic system' to refer to some aspect of our topic. That is inevitable, of course; we are surrounded by 'systems' such as the school system, the wireless telephone system and all sorts of things devised, organized and implemented by man.
The problem is that the economy we have is not a system; it is a series of markets, great and small, that, by their very nature, cannot be organized. This observation infuriates many on both the left and right who refuse to surrender their hopes that grand pieces of the economy can be crafted in ways to suit their goals.
Like almost all economists I dismiss the 'systems control' approach to the economy as fantasy, but you don't have to give weight to my musings on the matter. It might be better to make an intellectual voyage to the places treating the economy as a true system. History is replete with examples, but I advise going right to the contemporary bastion of economic systems; the People's Republic of Korea.
North Korea is the most centrally planned state of modern times. Others include Cuba, the former Soviet Bloc countries and even large swathes of China, but North Korea offers the best example of a half-century of an unfettered systems approach to the economy.
South Korean men grow more than three inches taller than their Northern kinsmen, due to the failure of ‘the system’ to deliver food effectively. The comparison between economic system and market on the Korean Peninsula offers real insight into the differences the approaches make in the lives of citizens.
Some might argue that North Korea is an ill-run anomaly that poorly represents the benefits of an economic system. That is a mistaken view. North Korean central planners are the best in the world. They have been at it since the 1940s, and failure is punished rather harshly.
The simple truth about the effectiveness of managing an economic system has some important implications for American public policy today. Take for example, the Affordable Care Act. The apparent failure of the website wasn't actually a failure. It did exactly what a dozen different government agencies wanted it to do. Sadly, only one of them worried much about its ability to connect consumers to insurers. That is only the beginning as nearly all facets other than marketing fail. A complete overhaul of the law is in the cards.
Still, somewhere right now, some central committee of the North Korean government is chuckling at us. They knew the Affordable Care Act would fail because it is too complex and we are too accustomed to personal liberty to submit to its demands.
So, if we are going to make the economic system of the ACA functional, we are going to have to ditch a good many of our personal liberties, and we’ll need the help of some smart North Korean planners.
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