APPLIED FINANCE

TOPIC:
‘Lange believed economic calculation was just a matter of throwing enough computing power at the problem. Today’s regulators believe the same thing – extensive risk models purport to give regulators enough information to manage the private sector. The global financial crisis demonstrated that those models are elaborate fictions. Yet the response from regulators has been to double down and insist on greater powers and more complex models.
The calculation problem is endemic in highly regulated sectors like health, where it is not the price system that coordinates resources, but bureaucrats and politicians. Every government proposes to reform health but the sector will remain unreformable until this basic problem is recognised. In the meantime health will continue to be dominated by rent-seekers and rife with inefficiency.’
Discuss.