Complexity kills. Keep it away from the spectrum auctions.
After three and a half years, the Obamacare website, when it launched on October 1, didn’t work. After two months of emergency overhauls, it still doesn’t work very well. As the Amazons and Wal-Marts process millions of transactions per day, Healthcare.gov struggles with a few thousand, or any at all.
After the initial launch, President Obama addressed the nation and, while listing a number of problems, made a startling acknowledgment: “What we are also discovering is that insurance is complicated . . . .”
Later, the President acknowledged “the way the federal government does procurement and does IT is just generally not very efficient.” And “[We] under-estimated the complexities of building out a website. . .”
The IT problems will eventually be fixed. The economic and political complexities of Obamacare, however, will persist. And they will further delink prices from value and discourage innovation across the health care landscape.
Complexity is spreading, and suppressing the economy. A Bloomberg study found the six largest U.S. banks, between 2008 and August of this year, spent $103 billion on lawyers and related legal expenses. Thank you, Messrs. Dodd and Frank.
The Administration now says Healthcare.gov is operating with “private sector velocity and effectiveness.” But why seek to further governmentalize one-sixth of the economy if the private sector is faster and more effective than government?
We emphasize this crisis of complexity because the Federal Communications Commission faces a key policy decision, one that hinges on this question. The FCC is contemplating rules for the most important auction of wireless spectrum since 2008, one that seeks to move underused broadcast TV spectrum toward higher value uses, like mobile broadband. Even in its most basic form, this “incentive auction” would be a complex, two-part affair. TV broadcasters will be asked to “bid” on a price to give up their spectrum. And mobile service providers will bid to acquire that spectrum.
The Department of Justice, however, has urged the FCC to effectively exclude the two largest bidders, AT&T and Verizon. Such a policy would not only hurt those two firms’ mobile customers who want fast service at reasonable prices. The exclusion could also throw the whole auction into question. With fewer large bidders, the TV broadcasters may not get the prices they’re looking for, and the amount of spectrum auctioned could plummet. An auction in which the government picks the winners isn’t an auction. (Ronald Coase looks down in disbelief.) What it is is a high-stakes bet that the DOJ and FCC know exactly how the wireless industry should be structured and exactly how this two-side auction will play out.
The private sector is good at mastering complexity and turning it into apparent simplicity — it’s the essence of wealth creation. At its best, the government is a neutral arbiter of basic rules. The Administration says it is “discovering” how these “complicated” things can blow up. We’ll see if government is capable of learning.
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