Why Elitists Fail

We expect those in government to know how to get things done. They need to understand organizational and political behavior, effective administration, and how to comply with the law.

We do not expect or want elitists and moral supremacists who believe that they know so much more about justice, the market, and how we should live. In his recent book Intellectuals and Society, Thomas Sowell explains how the "anointed" believe that their advanced education and depth of knowledge in one field automatically makes them an authority on any field in which they wield an opinion. Thus Noam Chomsky, a noted scholar in linguistics, has written dozens of books condemning America's and Israel's foreign policy with only the illusion of authority.

Sowell further explains that the most educated among us know only the smallest fraction of what is to be known. That these highly educated people may know so much more than any one of us does not mean that they know a fraction as much as do all of us.

I know the price of a Visconti fountain pen, an Ibanez George Benson Model guitar, an Acer 9" laptop, a subscription to Netflix, a ton of carbon steel, a Ford Expedition, a flight to St. Kitts, a forklift, a Rocky Patel cigar, a bottle of Glenrothes scotch, and an hour of time for a decent electrician. My expertise on these items combined with the market experience and expertise of millions of others is what constitutes a free market. It is how the prices of millions of items are accurately determined and how assets are allocated to production.

When prices are determined by central planning or anointed experts, shortages and gluts appear. The failed economies of the old Soviet Union and other systems determined by elite central planning evidences the flaw of thinking that elites know more than the combined individuals that comprise a healthy market.

But this flaw of elitist thinking and planning is not limited to market pricing.

I have a good idea about what works and doesn't work in sales and management incentives, how to run a steel warehouse safely, how much workers are willing to pay for health insurance, the benefits of paying bills promptly, how to analyze my blog hits, the risks of debt, treatment options for breast cancer, the benefits of a Health Savings Account, how to lower my triglycerides, the risks of improper investment diversification, and how technology can be used to waste time as easily as to make us more efficient.

Yet I know very, very little. But my knowledge and my experience combined with the millions of others with different but equally specialized experience is unmatched by the most highly educated group of intellectual elites.

Yet we often see intellectuals commit major logical errors even in the fields where they do have expertise.

Wall Street was brought to its knees by sophisticated models with which they thought they could engineer away risks. With unmerited confidence they overleveraged investments with a 95% chance of certainty only to learn the devastation involved in the 5% chance of loss if you have illiquid and complicated investments.

Climategate has shown us that even Ph.D. scientists can be swayed with money, power, and political influence. I may not know which end of the test tube the cork goes into, but such delusional certainty ("the debate is over") about such a massively complicated issue can make a skeptic of anyone. Science and politics go together no better than religion and politics.

Even the brilliant Ben Bernanke, the most noted modern scholar on the Great Depression of 1929, stood before audiences only a few years ago and explained that the effect of subprime loans would be limited and that the financial system was sound. History does repeat itself, but never in the same way.

Even the brightest minds cannot escape emotional impediments to a rational conclusion. Combining such emotional rationalism with a focus on theories detached from the verification of practical experience can be downright dangerous. This is why it concerns so many that Obama's administration has the lowest number of appointees from the private sector in his cabinet of any president in history.

The average American knows that taking a dollar from one person and giving it to another does not create a stimulus. The average parent knows that protecting one from the consequences of bad decisions does not teach one to make good decisions. The individual citizen knows that the government will not make better health care decisions or better investment decisions because they will never know as much as all the citizens. The voter who knows the consequences of too much debt on his household does not find it more acceptable when a lot of zeros are added to the balance and the loan account is moved to Washington, D.C.

One message from the Massachusetts Senate contest was that we do not trust educated elitists with making detailed decisions about our health care and our lives. American citizens have become too smart for that.

Henry Oliner blogs at Rebelyid.com.
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