The last few years have seen an extraordinary resurgence on the left of what Friedrich Hayek called “the fatal conceit”-the idea that central managers can have enough knowledge and wisdom to govern the minute details of our lives for us.
At the center of the health-care debate is the question of whether economic efficiency is best achieved by market forces and open competition or by an expert board of rationers. At the heart of the dispute about financial regulation is the question of whether risk can best be assessed by price signals or by a regulatory agency charged with discerning which companies are most important to the nation’s financial stability based on a complex statutory formula. From what kinds of cars we can buy to what kinds of light bulbs we’re allowed to use, the regulatory state and its pursuit of centralized rational control is once again ascendant.
Its ascendance, though, makes the left more vulnerable, not stronger. The regulatory state, and the technocratic premises that underlie it, are big fat targets for both political attacks and empirical critiques. The claim to rational control is, for one thing, deeply anti-democratic, and therefore frequently unpopular in a democracy. At least as important, though, it is horrendously ineffective in its own terms-again and again it produces not competent, effective management but colossal inefficiency. And the reason is obvious: Centralized management suffers from profound ignorance. No one can know enough to make it work; only everyone knows enough and, when it comes to economics, only markets can aggregate what everyone knows.
The case against today’s resurgent fatal conceit is therefore both populist and practical-and it must be at the heart of argument that conservatives take to the public.