Peter Boettke writes at the Coordination Problem blog:
The public (and politicians) often talk about public policy as if all that matters is intentions, but to the economists the question is never really one of intentions, but of incentives. When policies achieve their intended outcome it is because incentives were aligned correctly, when they fail to achieve those intended outcomes it is because incentives were not aligned appropriately for that purpose. ...
Consider the current case of the VA hospitals and the waiting line that veterans face. It is viewed as a scandal that someone must be held accountable for and that is the news story you read, hear and watch. But an economic analysis of the VA hospital system will reveal that it is the system that produces systemic incentives that make such waiting lines very predictable. In fact, you can read a wonderfully straightforward economic analysis of the VA system by Cotton Lindsay published in 1975 that clearly predicts the outcomes we are witnessing.
That rings true. That 1975 study, which was published by the American Enterprise Institute under the title Veterans Administrations Hospitals: An Economic Analysis of Government Enterprise, points out that the government provides health care for the poor and the elderly by contracting via Medicaid and Medicare with private hospitals: "It was not deemed necessary for the government to provide special hospitals for these groups." More from that 1975 AEI study:
owners of government hospitals have no rights to profits and future benefits provided by these hospitals. Indeed, one has difficulty identifying someone who fills the role of owner in the case of government enterprises. Ultimately, perhaps, members of the general public may be considered the owners, but their control over the fortunes of such enterprises is tenuous at best. As profits of such enterprises are never distributed, the interest of such owners in efficient operation is attenuated. Cost savings generated by efficient management may yield a budget surplus — to be spent to provide different benefits or tax savings to others. The share of such cost savings assured to vigilant investors in proprietary firms in the form of a capital gain is never paid by government enterprises. Lacking these rewards, citizen owners devote fewer resources to the monitoring of the management of government enterprises. These managers in turn have less incentive to manage effectively.
