The Smartest Government Is Not Very Smart

On Monday President Obama made a speech about "smart government," saying he was going to make the government "smarter, quicker and more responsive" by urging the cabinet to adopt all the latest new technology, or something like that.  The speech has rightly come in for a lot of ridicule.   See, for example, Jonah Goldberg at Town Hall here, or an IBD editorial here, or William McGurn in the New York Post here.

The fact is that it is not within the possibilities of government to be smart the way that markets are smart.   McGurn has it pretty close: 

[T]he problem with government is not that it lacks smart people. The problem with government is that it doesn’t have the incentives to get the best out of smart people — and never will.

Good point, but actually it's a lot worse than that.  On this subject, if you have never read the classic essay I, Pencil by the economist Leonard Read, you really should.  It's not long.  

Read's thesis is often stated as "nobody knows how to make a pencil."  And if you think about it, you will realize that, as seemingly simple as is a pencil, you have no idea how to make one from scratch, and neither does anybody else - even the people in the pencil business.  Imagine yourself in a hunter-gatherer society, and someone hands you a basic number 2 pencil and asks you to make another one.  If you are the smartest person in the world, and have your whole lifetime to try, you will barely have begun what you need to accomplish.  For starters, you need to learn how to make iron, and then axes and saws, to chop down and carve up trees.  (Try chopping down a tree some time with a stone ax.  After about a week of backbreaking work, with luck you have one large log.  Now, how are you going to cut it up into lots of little cylindrical pre-pencils using your stone tools?)  The fact is, the smartest person in the world will die a long, long time before figuring out how to make a pencil.  And what incentive is going to cause a next generation to continue the work?

Now, please, consider the problem of making a computer.  The fact is that no amount of mere "smartness" can accomplish the job.  Even collaboration among hundreds or thousands of "smart" people won't get anywhere.  The only way that these jobs get done is through thousands upon thousands of sequential inventions incentivized through the miracle of market exchange.

But our President thinks he can successfully reconfigure the use of energy, and the entire healthcare industry, because he is "smart" and he has a bunch of "smart" people working for him.   Well, the job of producing the best energy or the best healthcare for a $15 trillion economy is a lot harder than making a pencil.  What I can't get over is the hubris of their thinking that they can outdo in a short period of time what millions of people sharing information through markets have been able to do.

So how's the "smart" government doing?  It's just a question of which ridiculous illustration you want to pick.  Jonah Goldberg picks this one: 

Marvin Horne [is]a farmer who owes the federal government $650,000 in fines. Why?  He failed to comply with the Department of Agriculture's national raisin reserve program, created by the Truman administration, which even liberal Supreme Court Justice Elena Kagan dubbed "just the world's most outdated law." The program stockpiles raisins in case of an emergency. Such emergencies -- if they ever existed -- ceased being a problem after World War II. It's no surprise, alas, that government programs are as hard to fire as the employees working for them.

Well, that's a pretty good example, but really not hard to top.  One of my favorites is the so-called "Strategic Petroleum Reserve."  Here's the idea:  pump lots of oil out of the ground at great expense, ship it a long way at great expense, and then pump it back into the ground at great expense.  And presto, you have a "Strategic Petroleum Reserve."  Now, why would it not have sufficed to just buy the rights to an undeveloped oil field and leave the oil in place?  Because, dear man, we are way, way too "smart" for that!  

But of course I'm talking about small, small beer.  The current big money is in Obamacare.  Hubris on steroids!  At her new website, Megan McArdle has three posts on the ongoing unraveling of Obamacare, here, here and here.  I just can't get over the idea that "smart" people believe that all imperfections in an area covering some 18% of the economy, over $2.5 trillion per year, can be fixed a some "smart" people coming up with a 1000 page law and some other "smart" people coming up with many more thousands of pages of regulations, that no one can really ever read or understand, trying to micro-manage everyone's behavior.