Tag: ignorance

Governing in Ignorance

Last night Jimmy Wales, the founder of Wikipedia, delivered the first Joseph K. McLaughlin Lecture at the Cato Institute. He talked about the vision, history, organization, and impact of Wikipedia, and the influence of F. A. Hayek and his essay “The Use of Knowledge in Society” on his own initial conception of a crowdsourced encyclopedia. He also discussed Wikipedia’s occasional influence on public policy decisions, such as the defeat of the Stop Online Piracy Act (SOPA) in 2012. But I was particularly struck by this line (about 43:00 in the video):

Far too often lawmakers propose laws, and it’s fairly clear that they do not even have the most rudimentary understanding of how the internet works.

It reminded me of something Bill Clinton said at the Clinton Global Initiative in 2010:

Do you know how many political and economic decisions are made in this world by people who don’t know what in the living daylights they are talking about?

That’s a lesson policymakers ought to keep in mind whenever they contemplate legislating about health care, marriage, minimum wage laws, net neutrality, banking regulations, overtime pay, or anything else. Do they really understand how the particular market or industry works? Do they really understand how the impact of a new law or regulation will ripple through affected industries? In most cases they don’t, as Aaron Powell wrote about the lessons of SOPA:

SOPA was not the exception to the rule. Instead, it was just how things are done in Washington.

Charles Krauthammer, Rocket Scientist

Last evening on FoxNews, host Bret Baier reported that the Iranians had launched a rocket carrying ”a mouse, two turtles, and a can of worms” into space. He asked the panelists to speculate on the implications.

Charles Krauthammer inveighed “if you can put a mouse into space, you can put a nuke in New York, in principle.” Given that they are clearly developing the technological capabilities that would allow them to nuke New York, Krauthammer concluded, “our only hope on the nuclear issue or any other is a revolution and to help that revolution ought to be our task.”


To her credit, Jennifer Loven of the AP wasn’t having any of it. “It’s an incredibly large leap,” she pointed out, ”between a mouse in space and a nuke in New York….[I]t’s a…ginormous gap.”

How “ginormous”? The analogies are imperfect, but I can throw a football a fair distance. In principle, I could start in the Super Bowl.

More seriously, there are modest parallels to the subject of my first book – the mythical missile gap of the late 1950s. The missile gap was precipitated by the launch of the Sputnik satellite in October 1957. Millions of Americans became convinced that the beeping silver sphere orbiting the earth signified that the Soviets could, in principle, drop a nuclear weapon on any city in the United States. This misconception was helped along by some opportunistic fearmongering by, chiefly, Democrats who delighted in embarassing President Dwight Eisenhower. And the ploy worked. The Dems rolled up huge victories in the mid-term election of 1958, and John F. Kennedy capitalized on the missile gap to help get elected president in 1960.

The actual missile gap – in the U.S. favor – was irrelevant. It would have been equally irrelevant if the roles were reversed, with the Soviets in possession of hundreds of ICBMs, and the U.S. with only a handful of shorter range weapons. Even if the Soviets had perfected the ability to throw a nuclear warhead onto U.S. territory, what ultimately prevented them from doing so was not technological but psychological – they were deterred by our vast arsenal. And they continued to be so deterred for decades until the entire edifice of Soviet power came crashing down, from within, without any significant assistance from the United States.

Would Krauthammer contend that Eisenhower’s refusal to overthrow the Soviet regime in 1958 was “an embarassing failure?” The Soviets did, after all, actually have nuclear weapons, many of them. The Iranians have none, and have not even mastered the enrichment cycle, let alone the long process toward weaponization.  By implying that the only thing that stops the Iranians from immediately nuking New York is their technical capabilities, Krauthammer demonstrates a shocking ignorance of some of the most basic principles of international relations, beginning with deterrence. This makes him a horrible political scientist.

But as a rocket scientist, he’s even worse.

A Perfect Storm of Regulatory Ignorance

Does the government know what it’s doing, can it know what it’s doing, in financial regulation? In the latest issue of Cato Policy Report, Jeffrey Friedman doubts it:

You are familiar by now with the role of the Federal Reserve in stimulating the housing boom; the role of Fannie Mae and Freddie Mac in encouraging low equity mortgages; and the role of the Community Reinvestment Act in mandating loans to “subprime” borrowers, meaning those who were poor credit risks. So you may think that the government caused the financial crisis. But you don’t know the half of it. And neither does the government….

Omniscience cannot be expected of human beings. One really would have had to be a god to master the millions of pages in the Federal Register — not to mention the pages of the Register’s state, local, and now international counterparts — so one could pick out the specific group of regulations, issued in different fields over the course of decades, that would end up conspiring to create the greatest banking crisis since the Great Depression. This storm may have been perfect, therefore, but it may not prove to be rare. New regulations are bound to interact unexpectedly with old ones if the regulators, being human, are ignorant of the old ones and of their effects….

This premise would be questionable enough even if we started with a blank legal slate. But we don’t. And there is no conceivable way that we, the people — or our agents in government — can know how to solve the problems of modern societies when our efforts have, in fact, been preceded by generations of previous efforts that have littered the ground with a tangle of rules so thick that we can’t possibly know what they all say, let alone how they might interact to create another perfect storm.

Read the whole thing – about moral hazard, banking regulations, and the “perfect storm of ignorance” that happened and will happen again – here in PDF. Less attractive HTML version here. Jeffrey Friedman is editor of Critical Review and of Causes of the Financial Crisis, forthcoming from the University of Pennsylvania Press.