The Pretense of Knowledge Strikes Again!

As I watch the Administration struggle to enact the (un)Affordable Care Act, amused, I cannot help but think of F.A. Hayek’s famous “Pretense of Knowledge” speech that he gave upon accepting the Nobel Prize almost 40 years ago.

The pretense of knowledge, the idea that experts, particularly economists, think they know more than they actually do, seems to be quite acute these days.  The 2009 stimulus that was designed by renowned economists such as Christina Romer failed to live up by expectations because it could not stem unemployment to below 8%.  In fact, with the stimulus, we have even higher unemployment than we were projected to have without any stimulus.

I cannot picture the Affordable Care Act to work out any better than the stimulus.  It will probably be worse – much worse in affecting the United States.  The fatal conceit (to borrow another Hayekian term) of people such as Barack Obama, Paul Krugman, etc. stems from the belief that they think they can really know everything that goes on in a particular aspect of life, and, therefore, implement a policy to affect all possible outcomes in that area.  They think they have nailed economics down to the equivalent of a natural science.  Unfortunately, econ is not a natural science as Hayek pointed out by stating:

Unlike the position that exists in the physical sciences, in economics and other disciplines that deal with essentially complex phenomena, the aspects of the events to be accounted for about which we can get quantitative data are necessarily limited and may not include the important ones.

Economics is not something that can be performed in lab like physics or chemistry.  Rather, there is the role of human action that needs to be examined as well as the importance of information, which is generated in the ongoing process of the market.  The failures to recognize these things spelled the end of the Soviet Union.  American and European social democracy, while not Soviet, suffer from a more watered down version of the same problem.

Obamacare is already shaping up to be an ugly disaster.  It is apparent that bosses will fire or only hire part-time workers in order to avoid the dreadfully complicated employer mandate.  As George Will notes, in order for the Affordable Care Act to work, “mass irrationality” is required.

We’ve witnessed the experts’ ambitious plans fail with the stimulus.  How much worse will Obamacare be?  And let’s not forget Dodd-Frank or whatever else might be on the horizon – immigration reform, cap-and-trade, perhaps?

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