(FORTUNE Magazine) – Arguing that preventable medical errors kill more Americans each year than highway accidents, breast cancer, or AIDS, a prestigious National Academy of Sciences panel recently recommended that Congress require all health-care providers to report mistakes that cause serious injury or death. What's more, it advocated that a new federal agency--a Center for Patient Safety--be created to set the nation's error-reduction agenda.

The panel's proposals enjoyed immediate bipartisan support in Washington and were swiftly embraced by the Administration. "This is about far more than dollars or statistics," the President said. "...It's about the toll that such errors take on people's lives and on their faith in our health-care system."

Noble sentiments. Then again, who champions medical error? So why not extend the President's and the panel's compelling logic to other professions where error and incompetence can ruin people's lives? The legal system--much like health care--wields extraordinary influence over the quality of life. Congress should no doubt require cops, lawyers, judges, expert witnesses, and federal agents to report mistakes that cause serious miscarriages of justice or death. Create a Center for Litigant Safety. Similarly, management consulting, financial services, and journalism are each high-impact professions that should be required to report their errors and track their malpractices through federally funded centralized databases. As professionals, we should have both the integrity and the courage to acknowledge our serious mistakes. But far more often than not, we don't. We lie; we conceal; we obfuscate; we ignore. That's human nature. Denying human nature denies reality.

That's why this National Academy health-care initiative offers little more than a case study in managerial malpractice; it is a fundamentally silly idea supported by very smart people. How often do you fully disclose to your bosses how royally you have screwed up? This proposal was engineered around how people should behave rather than how they actually do. That guarantees failure. Management reforms guaranteed to fail define bad management.

In fact, police departments, bar associations, and medical societies already "require" their members to report malfeasance and egregious misbehavior. You will not be shocked to learn that these "honor systems" suffer abysmally low compliance rates. Indeed, no fewer than 20 states already require the sort of medical-error reporting the panel recommends. Any objective review reveals that the quantity and quality of hospital responses has been truly unimpressive.

Should this be surprising? Of course not. We celebrate the story of young George Washington and his cherry tree precisely because such confessional honesty is so rare. The problem, of course, is that in most organizations, mistakes are managed with sticks, not carrots. The bigger the mistake, the bigger the stick. By contrast, where are the positive incentives to disclose major mistakes? Who designs managerial systems where the rewards of self-reporting error outweigh the risks? There is almost zero constructive debate about how organizations should help people balance a healthy fear of making serious mistakes with the appropriate integrity.

If the National Academy panel truly had the spine to go along with its brains, it might have proposed rewarding those hospitals that did the best job making internal improvements on the basis of self-reported efforts. Perhaps they would be entitled to preferential treatment in Medicare reimbursement. Of course, true success would mean that other hospitals would adopt these error-preventing best practices. Or maybe the panel should have recommended that hospitals that didn't consistently evaluate error-reducing practices would get more frequent accreditation visits. Regardless, there should have been explicit acknowledgement that disclosure deserves carrots, not just the avoidance of sticks.

The point is to put as much effort into figuring out how to reward self-reporting as we do into punishing mistakes. Let's end the smarmy pretense that organizations want their people to "learn from their mistakes" when the overwhelming majority of job reviews almost never reward people for making mistakes even if they learn a lot from them. Unless the firm is prepared to publicly reward people for self-reporting mistakes with the same zeal they display in punishing miscreants--or covering up the blunders of top managers--then there is absolutely no way these "honor" systems can work. After all, few management practices are more loathsome than top executives' requiring their subordinates to display more courage and honesty than they do.

MICHAEL SCHRAGE is co-director of the MIT Media Lab's e-markets initiative and author of Serious Play. Reach him at michael_schrage@fortunemail.com.