To make an obvious point following up on an earlier post, Clayton Christensen and his colleagues are believers in the constructive power of disruptive innovation, a concept Christensen pioneered and that Tim Lee has lucidly explicated at his blog:

The key feature of disruptive technologies is that they speed up the pace of experimentation by making failures cheaper. When a technology is expensive, people are going to reserve its use for proven applications. Few companies can afford to buy a $20,000 computer just to let its engineers play with it. But if a technology is cheap, then lots of people can get their hands on them, and people are more likely to put them to more experimental use. An engineer won’t have to work very hard to persuade his boss to buy him a $1000 computer and let him screw around with it.
There are at least two reasons large firms have trouble dealing with disruptive technologies. One is that they’re bad at failing cheaply. They’ve got a lot of overhead, and they’ve got a reputation to protect. They can’t release a half-baked prototype and then abandon it if it doesn’t pan out. They can’t easily hire people and then lay them off a few months later if the project they’re working on fails to bear fruit. Instead, they tend to have big, expensive, high-profile failures. And these kinds of failures tend to derail the careers of the people leading them, even if they looked like good bets from an ex ante perspective. As a result, larger, more established firms will tend to be more risk-averse.

This helps explains the reluctance to embrace disruptive technologies in the heavily subsidized health space. In effect, the federal government serves as the equivalent of a large publicly-traded firm with a lot of vocal, active, and extremely risk-averse shareholders. The federal government is wary of releasing half-baked prototypes because the political blowback would be great. And this is a big reason why many on the right, myself included, believe that limited defined contributions are the right way to approach the health safety net. In an ideal world, we might depoliticize decisions around medical care, thus facilitating experimentation.

The danger is that limited defined contributions will only shift the locus of rent-seeking, and that politicization is a one way street. I am cautiously optimistic, but we should keep this danger in mind.