As the topic of income inequality has become more discussed, solutions are generally focused at some kind of program to redistribute wealth to make society more equal. In order to do this, you presumably would need smart people to decide how to do the redistributing. The challenge is, as Hayek pointed out, that there is a knowledge barrier insurmountable by human ingenuity. The reason that socialism can work in a society of 12 people is that they can all voice their wants and desires and willingly join a collectivist society. A prime reason why it doesn’t work for a nation is that it is impossible for the leaders of a country to fully know the demands of society which are constantly changing and evolving. Smart men can not perfect rules and regulations that would establish an equal society without there being eventual breakdown.
The value of a market system is that you can have very smart people as leaders, working to ensure justice is preserved and rule of law is maintained (including some regulatory requirements, including regulations against theft and murder), but not trying to direct all of society and the economy. Ross Douthat, who I generally find to miss the mark more often than not, addressed this idea in his most recent NYT column and it was possibly the best thing I’ve seen him write:
Inevitably, pride goeth before a fall. Robert McNamara and the Vietnam-era whiz kids thought they had reduced war to an exact science. Alan Greenspan and Robert Rubin thought that they had done the same to global economics. The architects of the Iraq war thought that the American military could liberate the Middle East from the toils of history; the architects of the European Union thought that a common currency could do the same for Europe. And Jon Corzine thought that his investment acumen equipped him to turn a second-tier brokerage firm into the next Goldman Sachs, by leveraging big, betting big and waiting for the payoff.
What you see in today’s Republican primary campaign is a reaction to exactly these kinds of follies — a revolt against the ruling class that our meritocracy has forged, and a search for outsiders with thinner rÃ©sumÃ©s but better instincts.
But from Michele Bachmann to Herman Cain, the outsiders haven’t risen to the challenge. It will do America no good to replace the arrogant with the ignorant, the overconfident with the incompetent.
In place of reckless meritocrats, we don’t need feckless know-nothings. We need intelligent leaders with a sense of their own limits, experienced people whose lives have taught them caution. We still need the best and brightest, but we need them to have somehow learned humility along the way.
See the whole column here.