The Fatal Conceit

June 12, 2009

A co-worker and I were discussing the merits of government run anything – health care, education, you name it.

I think government programs aren’t effective over time because the incentive structure, or feedback loops, governing the evolution of such programs are bad.  He thinks government programs can be effective, but the programs need the “right” people in charge.

This is a great example of the fundamental divide in thinking that Thomas Sowell explores in Conflict of Visions.   I believe the incentives of the system will win out.  My co-worker thinks the right people can.  It’s as simple as, “if it’s not working, fix it,” he says.

I asked, “Do you think you can determine if program is successful or not?”  “I’m a smart, educated man.  Yeah, I can figure that out,” he said, “you just have to define what success looks like and see if you’re achieving it.” That’s the Fatal Conceit.

It sounds  simple and I bet a majority agree with him.  But that doesn’t make it true.

Most people don’t realize how often they poorly judge things.  I let my co-worker know about a personal habit of his that annoys his neighbors.  He showed embarrassment and said he would’ve fixed it had he known.  My point wasn’t to embarrass him, it was to show that even “smart, educated” people aren’t always the best judges.

When judging success, it’s not always clear cut.  Even within the confines of a relatively simple competition like gymnastics, judges don’t always get it right.  Outside those confines, our records are much worse.

Why?  What we think is important, isn’t always  important to others.  Often times, what is important is elusive, subtle and very tough to articulate.

If us smart, educated folk were such good judges of success life would be much easier.  We could feed ourselves by sitting at home and investing in the right companies.


2 Responses to “The Fatal Conceit”

  1. writerdood Says:

    Targeting the sources of the costs of health care seems a more viable option than just subsidizing payments. We should focus on reducing costs, not feeding the organizations and institutions that have made increasing those costs their business.

    • Seth Says:

      writerdood – Thanks for the comment. Subsidizing payments is a source of cost increase.

      For example, I’ve received several ads to install a high efficiency air conditioner at my home. The ad informs me of the Federal tax credit for green upgrades. If I had a new a/c installed, the who’s really gets the Federal credit, me or the a/c company?

      If the credit increases demand, some or all of that credit gets passed to the a/c company in the form of a higher price.

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