In the modern corporatist state, regulations and their operationalization are far more complex than any mind can possibly understand — causing insuperable problems for the limited mind of your Congressman:

Economist Friedrich Hayek explained in 1945 why centrally controlled “command economies” were doomed to waste, inefficiency, and collapse: Insufficient knowledge. He won a Nobel Prize. But it turns out he was righter than he knew.  In his “The Use of Knowledge In Society,” Hayek explained that information about supply and demand, scarcity and abundance, wants and needs exists in no single place in any economy. The economy is simply too large and complicated for such information to be gathered together.  Any economic planner who attempts to do so will wind up hopelessly uninformed and behind the times, reacting to economic changes in a clumsy, too-late fashion and then being forced to react again to fix the problems that the previous mistakes created, leading to new problems, and so on.  Market mechanisms, like pricing, do a better job than planners because they incorporate what everyone knows indirectly through signals like price, without central planning.  Thus, no matter how deceptively simple and appealing command economy programs are, they are sure to trip up their operators, because the operators can’t possibly be smart enough to make them work.

Hayek’s insight into economics and regulation is often called “The Knowledge Problem,” and it is a very powerful notion. But recent events suggest that it’s not just the economy that regulators don’t understand well enough — it’s also their own regulations.

This became apparent when various large businesses responded to the enactment of Obamacare by taking accounting steps to reflect tax changes brought about by the new health care legislation. The additional costs created by Obamacare, conveniently enough, weren’t going to strike until later, after the November elections.

But both Generally Accepted Accounting Principles and Securities and Exchange Commission regulations require companies to account for these changes as soon as they learn about them. As the Atlantic’s Megan McArdle wrote:

“What AT&T, Caterpillar, et al did was appropriate. It’s earnings season, and they offered guidance about , um, their earnings.”So once Obamacare passed, massive corporate write-downs were inevitable.

They were also bad publicity for Obamacare, and they seem to have come as an unpleasant shock to House Energy and Commerce Committee Chairman Rep. Henry Waxman, D-Calif., who immediately scheduled congressional hearings for April 21, demanding that the chief executive officers of AT&T, John Deere, and Caterpillar, among others, come and explain themselves.

Obamacare was supposed to provide unicorns and rainbows: How can it possibly be hurting companies and killing jobs? Surely there’s some sort of Republican conspiracy going on here!

More like a confederacy of dunces. Waxman and his colleagues in Congress can’t possibly understand the health care market well enough to fix it. But what’s more striking is that Waxman’s outraged reaction revealed that they don’t even understand their own area of responsibility – regulation — well enough to predict the effect of changes in legislation ..

Read the whole thing.

UPDATE:  Jeffrey Friedman and Andrew Haldale on the same topic.  Here’s Haldale:

Complex control of a complex system is a recipe for confusion at best, catastrophe at worst. Complex control adds, not subtracts, from the Knightian uncertainty problem. The US constitution is four pages long. The recently-tabled Dodd Bill on US financial sector reform is 1,336 pages long. Which do you imagine will have the more lasting impact on behaviour.

Hayek somewhere says virtually the same thing.  HT Arnold Kling.

Two more economists weigh in on the “what is wrong with macroeconomics” question:

The economics literature is full of different models, each one assuming that it adequately captures how all rational market participants make decisions. Although the free-market Chicago school, neo-Keynesianism, and behavioural finance are quite different in other respects, each assumes the same REH-based standard of rationality.

In other words, REH-based models ignore markets’ very raison d’etre: no one, as Friedrich Hayek pointed out, can have access to the “totality” of knowledge and information dispersed throughout the economy. Similarly, as John Maynard Keynes and Karl Popper showed, we cannot rationally predict the future course of our knowledge. Today’s models of rational decision-making ignore these well-known arguments.

The unreasonableness of this standard of rationality helps to explain why macroeconomists of all camps and finance theorists find it hard to account for swings in market outcomes. Even more pernicious, despite these difficulties, their models supposedly provide a “scientific” basis for judging the proper roles of the market and the state in a modern economy.

But incoherent premises lead to absurd conclusions …

Note well that Hayek also showed that we cannot predict the future course of our knowledge, quite independently of Keynes and Popper.

Jennifer Rubin discovers both Hayek’s knowledge problem and Hayek’s distributed knowledge and discovery procedure solution.  Did she read John Stossel or The Constitution of Liberty?

John Stossel weighs in on the brain-dead arrogance of  President Obama & the U.S. Congress:

focus on the spectacle of that handful of men and women daring to think they can design the medical marketplace. They would empower an even smaller group to determine — for millions of diverse Americans — which medical treatments are worthy and at what price.

How do these arrogant, presumptuous politicians believe they can know enough to plan for the rest of us? Who do they think they are? Under cover of helping uninsured people get medical care, they live out their megalomaniacal social-engineering fantasies — putting our physical and economic health at risk in the process.

Like the politicians, most people are oblivious to F.A. Hayek’s insight that the critical information needed to run an economy — or even 15 percent of one — doesn’t exist in any one place where it is accessible to central planners. Instead, it is scattered piecemeal among millions of people. All those people put together are far wiser and better informed than Congress could ever be. Only markets — private property, free exchange and the price system — can put this knowledge at the disposal of entrepreneurs and consumers, ensuring the system will serve the people and not just the political class.

This is no less true for medical care than for food, clothing and shelter. It is profit-seeking entrepreneurship that gave us birth control pills, robot limbs, Lasik surgery and so many other good things that make our lives longer and more pain free.

To the extent the politicians ignore this, they are the enemy of our well-being. The belief that they can take care of us is rank superstition.

Energy regulation economist Robert Murphy weighs in:

Fans of Austrian economist Friedrich Hayek — who warned against the “pretense of knowledge” — should be even more concerned about the sheer audacity of the field of climate economics. After all, it is rather absurd to argue about the impacts of present tax policies on global temperatures in the year 2150. Yet, it is precisely these projections that provide the foundation for policy recommendations.

Many critics have raised this objection before, but it bears repeating: We have no idea what the world economy will be like in the 22nd century. Had people in 1909 adopted analogous policies to “help” us, they might have imposed a tax on buggies or a cap on manure, needlessly raising the costs of transportation while the U.S. economy switched to motor vehicles. This is not a mere joke; “serious” people were worried about population growth, and the ability of large cities to support the growing traffic from horses. Had someone told them not to worry, because Henry Ford’s new Model T would soon transform personal locomotion without any central direction from D.C., these ideas would probably have been dismissed as wishful thinking. As famed physicist Freeman Dyson has mused, future generations will likely have far cheaper means of reducing atmospheric concentrations of carbon dioxide, if the more alarming scenarios play out.

Barack Obama and some on his economic team claim to be students of Hayek.  But as Université du Québec economist Pierre Lemieux points out, Obama’s new plan to “regulate” the macroeconomy is premised on purely magical thinking where government bureaucrats have an impossible God-like knowledge of market relations, and where bureaucrats and politicians have a complete personality transplant making them into not-of-this-world angels who no longer care about themselves, their friends and the sources of power, and who  care only about the overall performance of the economy.  In other words, Obama and his economic team get an “F” in Hayekian Econ 101:

Why is government intervention so expectedly inefficient in promoting economic growth and stability? The short answer is two-pronged. First, politicians and bureaucrats don’t have the incentives to fix, or not to break, the economy. Second, there is an insuperable information problem, which Nobel laureate Friedrich Hayek’s work put in clear focus: the state (the whole apparatus of government) simply does not have the information necessary to intervene efficiently. The business cycle is a complex phenomenon on which generations of brilliant economists still don’t agree. How could we expect that campaigning politicians and bureaucrats in committees will resolve the problem? How could they, as the 89-page Financial Regulatory Reform document states, get “a focus on identifying whether new trends might be creating risks that would otherwise go unseen”?