Smart government

A smart piece on The Knowledge Problem in today’s NYPost.

William McGurn in Get smart, Mr. prez:

People such as our president generally start out with the belief their ideas are smart because they are smart. So they take for granted that government will be smart if led by, well, smart people like themselves.

There is, of course, an alternate view. In this view, just because the smart appointee in the Roosevelt Room thinks America ought to go all out for hybrid vehicles doesn’t necessarily make that a smart way to spend taxpayer dollars. Especially when people in the affected industry, who have more first-hand experience and are reading the same signals, are unwilling to invest their own money in these smart schemes absent a government subsidy or mandate.

In this view, the problem with government is not that it lacks smart people. The problem with government is that it doesn’t have the incentives to get the best out of smart people — and never will.

The reason Steve Jobs and not the Commerce Department came up with the iPhone is because Jobs had a market that priced the costs and benefits, as well as highly personal consequences for his decision, in the form of profits for success and losses for failure.

So we’re led to a paradox the president hasn’t yet addressed. In the market, the collective verdict that emerges from gazillions of voluntary exchanges results in an outcome smarter than the smartest individual involved. In sharp contrast, in government the collective schemes imposed by the smartest individuals almost always result in an outcome dumber than the dumbest member.

And that, my friends, is why only an administration that prides itself on being “smart” could give us the Chevy Volt, Solyndra and ObamaCare.

Or, in other words:

Whether you want to call it Burkean or Hayekian, the basic idea is that experts can never have enough knowledge to successfully plan societies, save in the crudest and (hopefully) most temporary ways (such as during war mobilization or natural disasters). It’s not merely a question of whether people can be smart enough, it’s that they can never know enough. The accumulated wisdom in institutions, rules, traditions, customs is much greater and more complex than anything a single person or small group of persons can comprehend, never mind master.

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