Government's Knowledge Problem


Reason Foundation Senior Analyst Shikha Dalmia recently posted a witty and provocative article suggesting that sometimes very smart people in government can produce really bad policy. This is not to suggest smart people are bad—quite the contrary. However, Dalmia points out that really intelligent policy makers are not exempt from making poor decisions. One of my favorite quotes from the article: 

But the bigger reason for this anti-intellectual animus is that every time really smart people run the country, things go spectacularly wrong … So why do intelligent people consistently make such a hash of things? Because they are smart enough to talk themselves into anything. Ordinary mortals don't engage in fancy mental gymnastics to reach conclusions that defy common sense. But intellectuals are particularly prone to this.

In response to this article, a friend of mine said: "Right because we all remember the disastrous administrations of Thomas Jefferson, Theodore Roosevelt, Abraham Lincoln, Franklin Roosevelt, and Dwight Eisenhower. God, I hate smart people!"

He makes a good point: in fact, we like smart people and they don't do everything wrong. However, the article did not intend to suggest we should not want smart people in government. Instead, the point of the article is to point out a problem with a particular kind of governing. Specifically, many very smart individuals, academics, policymakers, etc. often wrongly assume they have enough information (about the economy, details specific to environments, regions, people, industries, the list goes on) to adequately model behavior and enact plans centrally. For example, MIT hosted a panel on the federal budget deficit this week. Someone asked why the stimulus projections were incorrect. The panel professors, including Harvard's Greg Mankiw and Jeff Liebman, and MIT's Peter Diamond all admitted that either the baseline assumptions or growth projections or both were wrong. Nevertheless, few were apologetic for Washington imposing failed economic models on Americans. Often, very smart policymakers and academics overestimate their own abilities to anticipate how their policies will work in practice. Smart people are wonderful. However, individuals who overestimate their capacity to have adequate knowledge to plan for others also overestimate their ability to implement their ideas without negative externalities.

Indeed, smart individuals in government often are prone to this incorrect assumption that they have enough information to make plans for other people. It is not too much to ask that policymakers take a more humble approach and recognize what they do not know and what they cannot achieve in government.