David Brook’s Op-Ed piece in the New York Times is quite insightful. He argues that “humans are overconfident creatures.” They tend to assume that they are smarter than they really are. But it seems that this human overconfidence has been transferred to Washington. Brooks writes:
…the bonfire of overconfidence has shifted to Washington. Since the masters of finance have been exposed as idiots, the masters of government have concluded (somewhat illogically) that they must be really smart.
Government has attempted to regulate executive pay assuming that it is the central problem of the market. Brooks observes: “The Federal Reserve…has decided to police banks and veto pay deals that lead to excessive risk. Those experts must have absolutely gigantic brains if they can define excessive risk years before investments pay off.” This type of hubris is prevalent in Washington, because in the spirit of humility, thinking that regulating everything and everyone is the “wise” solution, they have become political asses. Even if they know nothing concerning a particular industry, yet their supposed wisdom tells them that they do. Brooks concludes brilliantly:
Sometimes we seem to have a government with no sense of those limits, no sense that perhaps government officials don’t know how to restructure General Motors, pick the most promising battery technology, re-engineer the health care system from the top, or fine-tune the complex system of executive pay.
Government’s conceit is their own destruction. The wisdom that gives them temporary power is the wisdom that will eventually bring the entire system down.
