Appendix n — 🧠 Theory Overview

Central planning doesn’t work. This isn’t ideology, it’s accounting.

The Soviet Union had brilliant economists, dedicated scientists, and 70 years to figure it out. Result: 100 million dead, mostly from starvation. Not because they were evil. Because committees can’t process the information needed to allocate resources across millions of people.

1962: When the Kefauver-Harris Amendment Destroyed Medical Progress

Pre-1962: 144,000 physicians ran real-world trials through JAMA. Drug costs: $74M. Timeline: 2-3 years.

1962: FDA centralizes efficacy trials. Immediate disaster:

• New drug approvals drop 70% overnight
• Drug costs explode 35X to $2.6B today
• Timeline stretches to 17 years to market
• Life expectancy gains slow by more than half

2020: Oxford RECOVERY trial proves decentralization still works. $500 per patient vs FDA’s $41,000 standard. That’s 82X more efficient.

They turned medical research into Soviet agriculture.

Every Government “War” Creates More of What It Fights

The pattern is perfect:

• War on Drugs ($1T): Created cartels, violence up 10,000%
• War on Poverty ($22T): Welfare cliffs keep people poor
• War on Cancer (Nixon 1971): $200B/year treating, not curing
• War on Terror ($8T): Every drone strike creates 10 terrorists

The perverse incentive: Bureaucracies need problems to exist.

The Knowledge Problem (Hayek Was Right)

200 NIH bureaucrats can’t know 8 billion health needs. Every patient knows their pain. Committees know PowerPoints.

Soviet agriculture: Smart people, 100 million starved. NIH medicine: Smart people, 55 million die annually.

The pretense of knowledge: Central planning always fails.

Markets: The Distributed Computer That Works

Prices are information packets. Committees are noise.

• RECOVERY trial: $500 vs $41,000 per patient (82X efficiency proven)
• Pre-1962 medicine: Doctors prescribed, patients decided
• Software/Internet: No FDA = exponential innovation
• LASIK/cosmetic surgery: Cash markets = ~20% price drops

Markets process information no committee can match. Friedrich Hayek called it “the knowledge problem.” We call it “why the Soviet Union collapsed and America didn’t.”

Public Choice Theory: Everyone’s Selfish, Use It

Politicians maximize power, not health (2-year horizons). Bureaucrats maximize budgets (bigger = more power). Defense contractors spend $100M lobbying → get $2T contracts. That’s a 1,813% ROI. They’re not evil, they’re rational.

So we use that. Make curing disease more profitable than causing it. Make peace more profitable than war. Bribe the same people, but for health instead of death.

Public choice theory says people respond to incentives. So we change the incentives.

In This Section

• Chapter 5: The Two Wars - First “war on” anything designed to win