Markets, Not Experts, Are the Best Decisionmakers
“Is this woman brilliant or is she brilliant? C’mon people, wake up. Do what’s right for this great country.”
By; Barry Brownstein
This article first appeared at FEE.org
The writer was exhorting his Facebook friends to support Clinton just moments after a February town hall meeting between Clinton and Sanders. Her brilliance was obvious to him and, sincerely concerned about the future of the country, he felt a duty to inform others.
He is not the only one looking for brilliance in politicians. Others have found it in Ted Cruz, who is said to be “off the charts brilliant.”
Why seek brilliance in politicians? There seems to be a widespread belief that America will be well again if a politician with the right plan and the intelligence to carry it out obtains public office.
What if that belief is false?
Just How Brilliant Can Any of Us Be?
FEE founder Leonard Read in his book Deeper Than You Think noted that, despite our intelligence, each of us can know very little: “No person, regardless of his pretensions, glimpses more than an infinitesimal fragment of the Truth.… No person is any more than an intellectual mite, a spiritual speck in the Cosmic Scheme.”
“Intellectual mites” can’t solve the fundamental economic problem of society. In his classic essay “The Use of Knowledge in Society,” Nobel laureate F.A. Hayek explains why. First, he points out the unimaginable powers we would need to centrally plan our economy:
If we possess all the relevant information, if we can start out from a given system of preferences, and if we command complete knowledge of available means, the problem which remains is purely one of logic.
Of course, none of those ifs is possible. Hayek continues:
The knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus … a problem of the utilization of knowledge which is not given to anyone in its totality.
When we understand Hayek, we understand that politicians who think they can plan don’t even know how ignorant they really are. Read explains:
The political officeholder who recently intimated that he and his bureaucratic staff now had the will and the power to maintain an ever-expanding economy may be less a speck than you or I, for he doesn’t even know how little he knows.
Why would politicians lack humility? Read described a human tendency that makes it hard for any of us to be humble:
How difficult it is to appreciate the littleness of our private wisdom, awareness, perception, consciousness! The tendency is to compare one’s self with one’s fellows which, more often than not, leads to the conclusion, “What a bright boy am I!”
The bright boys and girls who hold political office know little about the accuracy of their decisions and judgments. Nobel laureate behavioral economist and psychologist Daniel Kahneman warns: “Overconfident professionals sincerely believe they have expertise, act as experts and look like experts. You will have to struggle to remind yourself that they may be in the grip of an illusion.”
Do we enable politicians when we fall for their confident air and proclaim their brilliance? After all, we expect candidates to produce answers for problems inone-minute sound bites. When they don’t, we call them indecisive and conclude that they lack solutions.
The Market Has Wisdom That Individuals Lack
In his book The Wisdom of Crowds, journalist James Surowiecki explains that intelligence is not fungible: “there’s no real evidence that one can become expert in something as broad as ‘decision making’ or ‘policy.’”
Surowiecki has counterintuitive conclusions for those who believe in decision making by elite experts:
If you can assemble a diverse group of people who possess varying degrees of knowledge and insight, you’re better off entrusting it with major decisions rather than leaving them in the hands of one or two people, no matter how smart these people are.
The diversity we need to make better decisions is inherent in markets. As Surowiecki observes, markets are “made up of people with different attitudes towards risk, different time horizons, different investing styles and different information.”
Similarly, economist William Easterly instructs us in his new book, The Tyranny of Experts, that markets, not brilliant politicians, are “the most successful problem-solving system in human history.”
The truth is, each of us knows very little. As individuals, we are fallible decisionmakers. We don’t know where solutions will emerge, or as Easterly puts it, “what will be the solution,” or “who will have the solution.”
Humility toward mighty “impersonal forces,” far greater than any human mind, is what is called for. Substituting the brilliance of the individual mind for the wisdom of the market leads to disaster. So, what role does that leave for brilliant politicians?
Do Brilliant Politicians Diminish Us and Prevent Solutions?
In her book Multipliers: How the Best Leaders Make Everyone Smarter, leadership consultant Liz Wiseman distinguishes between two types of organizational leaders: those who are able to tap into dispersed organizational knowledge and those who diminish organizational knowledge. Diminishers, she observes, are at their core “intellectual supremacists.” Wiseman writes,
The Diminisher’s view of intelligence is based on elitism and scarcity. Diminishers appear to believe that really intelligent people are a rare breed and I am one of the few really smart people. They then conclude, other people will never figure things out without me.
Some leaders, Wiseman writes, “seem to drain intelligence and capability out of the people around them.” Do brilliant politicians drain the “intelligence and capability” out of the whole economy?
What if what ails us is not the absence of a brilliant political leader? What if what ails us is not too many problems and too few dollars to solve them? What if our real problem is that human ingenuity is being blocked by those who lack the humility to see that their real job is to steward property rights and the rule of law and then get out of the way?