Regular reader and frequent commenter Kevin Corcoran sent me his thoughts on the post I did on Joey Smallwood and industrial policy. We agreed that his long comment is better as a standalone post. Here it is:

On the one hand, it’s easy to read about the floundering of Joey Smallwood in the article you [DRH] mentioned and have a chuckle at his fumbling ineptitude. But at the same time, this story shows one of the problems with a common response to a common criticism of industrial policy and central planning.

The common criticism is that politicians necessarily intervene in areas where they do not, and cannot, have any competence. This isn’t a claim that politicians are stupid, of course: as George Will put it in The Conservative Sensibility, “The simple, indisputable truth is that everyone knows almost nothing about almost everything. Fortunately – yes, fortunately – this is getting truer by the day, the hour, the minute. As humanity’s stock of knowledge grows, so, too, does the amount that, theoretically, can be known but that, practically, cannot be known.”

But, the criticism continues, legislators, whose capacity for knowledge is no different from anyone else’s, still put their fingers into pretty much everything. There’s an amusing section in P. J. O’Rourke’s Parliament of Whores where he describes about two dozen different topics Congress would be working on that week, and observes “that, one would think, is about the limit of human capacity for expertise. To be conversant with twenty-five disparate issues at once is as much as we can ask of a person. However, it is less than 10 percent of what we ask of a congressman. During the same week in 1990, 250 other items were also on the congressional calendar.” O’Rourke lists some of these varied and unrelated topics including fish hatcheries, outer space, the economy of the Caribbean, nutritional labeling, “and, of all things, paperwork reduction.” He then quips “We expect our congressman to know more about each of these things than we know about any of them. We expect him to make wiser decisions than we can make about them all. And we expect that congressman to make those wise and knowledgeable decisions without regard for his political or financial self-interest.”

The common response to this criticism is to concede that of course politicians can’t be competent in all these areas, but that’s okay because politicians can consult with people who are experts in each of these areas. This will let the politicians cast votes that are informed by multiple lines of expertise, and allow their decision making to benefit from all that accumulated expertise despite their inability to gain that knowledge directly.

However, this response cuts very little ice. The simple fact is that knowing who is an expert in a given area, and how well their expertise will apply to the situation at hand, is itself something that requires a significant amount of knowledge. Smallwood clearly didn’t know how to establish a fishing industry to catch herring. He instead turned that over to Icelandic herring fisherman, to less than impressive results. Maybe these were lousy fisherman, or maybe methods of fishing that are successful in Iceland are ill suited to Newfoundland. Regardless, Smallwood, lacking knowledge of fishing, also lacked knowledge on how to identify proper expertise in fishing. But rather than allow a competitive fishing industry to emerge on the open market, he picked his chosen “experts” and funded them at public expense. The results shouldn’t surprise anyone.

Now, reconsider the situation of the average member of Congress. Consider the hundreds of different topics they vote on and regulate any given year. Does anyone seriously believe that each member of Congress is able to properly identify the best and brightest scholars for all these different topics, with the relevant expertise, that will be properly applied in each situation? And that these politicians will wisely absorb and understand the advice they are given and properly reflect it in their votes? Does anyone believe this is an accurate description of how various federal regulators operate when they pass thousands upon thousands of new pages of regulations every year on every topic imaginable? To crib a line from Robert Heinlein, if you believe that, I have a wonderful offer for you. No checks, please. Cash only, and in small bills.

I agree with Kevin.

Let me, DRH, clarify what I think is Will’s point in writing, “Fortunately – yes, fortunately – this is getting truer by the day, the hour, the minute.” The reason it’s fortunate is that it’s a necessary consequence of something that’s fortunate: namely, the constantly expanding international division of labor, which makes almost everyone better off. The greater the division of labor, the more specialized we become and, therefore, the more productive.

Also, to drive home Kevin’s point, yes, Joey Smallwood made a lot of mistakes by not consulting with experts. But the whole original article from which I quoted shows how often he did consult with experts who gave bad advice. You still have to have enough expertise to choose good experts.