By Arnold Kling
In the context of political economy, overconfidence takes the form of the contention of regulators that they fully understand the problems they face and are able to design optimal solutions for them. One type of overconfidence particularly relevant to the problems of market economy is what the psychologists Rozenblit and Keil named the illusion of explanatory depth (IOED). Rozenbilt and Keil (2002) showed, in a series of experiments, that people systematically overestimate their understanding of complex phenomena. We falsely believe that we understand the causes, effects and inner mechanics of different things, events or processes much better than we actually do. Participants in the experiments testing for this illusion would consistently report a certain level of understanding of the given phenomena, before hearing an expert explanation of the same. Only after finding out the true explanation would they realize that their understanding was poor.
Read the whole thing. I think that if there is one belief that I have that makes me a skeptic on government intervention, it is the belief that technocrats overestimate their own knowledge and competence.