The government has, rightly, been criticized for wasting £3bn on benefit fraud and errors. No-one, though, has juxtaposed this waste with claims that the National Institute for Health and Clinical Excellence has been killing people by refusing to approve Taxotere Avastin and (until recently) Herceptin to cancer sufferers.
But there should be a link. In one area, the govenment has been reckless with the tax-payers money. And in another it has been so careful that it has been willing to risk lives to save money*.
There are some inferences here:
1. Government acts irrationally. There are two particular cognitive biases here. One is the framing effect. Within the frame of £121bn of social security spending, £3bn of waste seems small, so bureaucrats don't care much about it. But within Nice's smaller frame, the £44,000 cost of a two-year course of Herceptin is big money. The second bias is mental accounting. Money is valued more highly in some arbitrarily-defined compartments than others.
2. There's no such thing as joined-up government. One proper function of the Prime Minister should be to ensure that the mental accounting error is eliminated, so that a pound in the DWP had the same value as one in the NHS. Is the failure to do this a failure of this particular PM, or is it a structural failure of government?
3. Many people are applying research on cognitive errors in the wrong fields. Its applications to stock markets have been massively explored. But its applications to government are often overlooked.
4. Cost-benefit analysis is applied inconsistently. It's used, sometimes rigorously, in some areas but ignored in others; there hasn't, to my knowledge, been an official cost-benefit analysis of whether the DTI or FSA is worth the cost of their existence, or whether we should have gone to war in Iraq or built the Millennium dome. Could it be that CBA is just a sham, used to give a veneer of technocratic respectability to government decisions that are, in fact, irrational?
* Whether the denial of Herceptin and Taxotere has actually cost lives is debatable. What's clear though - and all that matters for my purposes - is that the NHS has wanted to deny people potentially life-saving treatment on cost-benefit grounds, even after drugs have been approved by Nice.