View Full Version : The Era of Expert Failure

09-15-2010, 07:41 PM

Ironically, whenever government experts fail, their instinctive reaction is to ask for more power and more resources. Instead, we need to step back and recognize that what we are seeing is not the vindication of Keynes, but the vindication of Hayek. That is, decentralized knowledge is becoming increasingly important, and that in turn makes centralized power increasingly anomalous.

Expertise becomes problematic when it is linked to power. First, it creates a problem for democratic governance. The elected officials who are accountable to voters lack the competence to make well-informed decisions. And, the experts to whom legislators cede authority are unelected. The citizens who are affected by the decisions of these experts have no input into their selection, evaluation, or removal.

A second problem with linking expertise to power is that it diminishes the diversity and competitive pressure faced by the experts.

A key difference between experts in the private sector and experts in the government sector is that the latter have monopoly power, ultimately backed by force. The power of government experts is concentrated and unchecked (or at best checked very poorly), whereas the power of experts in the private sector is constrained by competition and checked by choice. Private organizations have to satisfy the needs of their constituents in order to survive. Ultimately, private experts have to respect the dignity of the individual, because the individual has the freedom to ignore the expert.

These problems with linking expertise with power can be illustrated by specific issues. In each case, elected officials want results. They turn to experts who promise results. The experts cannot deliver. So the experts must ask for more power

09-16-2010, 10:02 AM
From the article:

When knowledge is dispersed but power is concentrated, I call this the knowledgepower discrepancy. Such discrepancies can arise in large firms, where CEOs can fail to appreciate the significance of what is known by some of their subordinates. I would view the mistakes made by AIG, BP, Freddie Mac, Fannie Mae, and other well-known companies as illustrations of this knowledge-power discrepancy in practice.

With government experts, the knowledge- power discrepancy is particularly acute.

As we have seen, the expectations placed on government experts tend to be unrealistically high. This selects for experts with unusual hubris. The authority of the state gives government experts a dangerous level of power.

And the absence of market discipline gives any errors that these experts make an opportunity to accumulate and compound almost without limit.

In recent decades, this knowledge-power discrepancy has gotten worse. Knowledge has grown more dispersed, while government power has become more concentrated.

Excellent catch, warpig! Everybody on CU needs to read this.