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Quotation of the Day…

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… is from page 215 of the late Nobel laureate Elinor Ostrom [2]‘s 1990 book, Governing the Commons [3]:

The intellectual trap in relying entirely on models to provide the foundation for policy analysis is that scholars then presume that they are omniscient observers able to comprehend the essentials of how complex, dynamic systems work by creating stylized descriptions of some aspects of those systems. With the false confidence of presumed omniscience, scholars feel perfectly comfortable in addressing proposals to government that are conceived in their models as omnicompetent powers able to rectify the imperfections that exist in all field settings.

DBx: Lin Ostrom here is complaining about intellectuals who, impressed with models such as the prisoners’ dilemma, leap to the conclusion that people in real-world settings are inherently and always unable to change the institutional settings in which they operate in order to provide incentives to act more cooperatively. (Many of the field studies that she reports in her book prove this conclusion to be invalid.) And then once that conclusion is embraced, these intellectuals then – in a move with absolutely no scientific justification – merely presume not only that top-down intervention by the state is the only way to change institutional settings, but that state officials themselves are perfectly informed and act with ideal, public-interest incentives.

But the intellectual myopia complained of here by Ostrom is prevalent throughout economic-policy matters. Does today’s industrial structure not look like the ideal industrial structure identified in textbooks? Well, the problem must be with today’s industrial structure. Economists will use that textbook ideal to convey all the knowledge and information necessary for saintly and courageous government officials to correct matters. Do individuals in market act in ways that seem to impose what textbooks describe as externalities on third-parties? No prob. Economists in league with super-hero government officials to the rescue – if only rubes and ideologues wouldn’t obstruct the work of these dedicated social engineers.

Are there models somewhere that allow us to justify minimum-wage legislation or tariffs or occupational licensing or mandated paid-leave or government-imposed single-payer health-care or restrictions on campaign-finance spending or restrictive zoning or …. ? Yes. It’s child’s play to craft coherent economic models to justify almost any policy action or inaction. But deep wisdom is required to know which economic models are appropriate and when and to what degree. Alas, the supply of childishness is much higher than is the supply of wisdom.