Monday, October 06, 2008

The Trouble With Experts


As I write these words, the stock markets around the world are tanking in the wake of a nearly trillion dollar bailout that the experts designed to prevent this very collapse. Oops.

Financial issues are not what we do here, but I think there is an aspect of the financial crisis unfolding--potential catastrophe, actually--that is germane to some of our conversations. It is the failure of expertise to wisely guide society, and our concomitant over-reliance on "the experts" to tell us what to do--a condition I call "expertitis."

This is what I mean by the term: It seems to me that if one looks deeply at almost every major problem we face today, we will find that "experts" are behind it. Why is that? Such a conclusion requires some deep reflection. But initially, I think it comes from a collapse of self confidence among the people to deal with the issues of society leading to our delegating authority to our perceived betters who have, alas, rejected venerable traditions and time-tested principles that I still think governs the lives of most people.

And here is the problem with expertitis: Too often, the advise or decisions made by the ruling and consulting elites are not founded in the pursuit of principle. And that leaves analysis and decision making more vulnerable to the imposition of ideology, the pursuit of self interest, a lack of common sense, and increasingly, sheer snobbery. As a consequence, rather than following a consistent and clear through line, we grow erratic and lurch from crisis to crisis to crisis. Meanwhile, in a bitter irony, as our problems mount, real people are told they are just not equipped to deal with these important and difficult issues. That we have to leave it all "to the experts" who were main contributors to the problems we face in the first place.

Well, look around. We can see quite clearly how well that has worked out. The bailout is a clear case in point.

Please don't misunderstand: I am not anti-intellectual. I am not saying that expertise does not have its place. Clearly, it does. We need clear-headed advise based on depth of knowledge. So I say, by all means let's listen to what experts have to say, but do not blindly follow or cede control. They clearly have not earned it. Besides, the times are growing far too dire for that kind of passivity.

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5 Comments:

At October 07, 2008 , Blogger Donnie Mac Leod said...

I have a pretty sound financial base & I never depended upon experts to tell me how to manage. Suckers are best manipulated by experts that use a selling point to take advantage. One regret I had was back around 1971. I was 21 & looking to buy gold as a long term investment. I wanted to put 100 dollars a month in gold for 10 years. I didn't, as I was also involved the process of buying a house and starting a family. I bought the house and some RSSP's instead. Gold was $32 dollars an ounce. My instincts were certainly good about the gold. I learned to calculate my life savings by investing in tangible concrete investments like land, buildings & less in paper gains like Enron.

 
At October 07, 2008 , Anonymous Anonymous said...

One of the problems I find that most people have regarding financial advice is that even though most believe in the old saying, "If it's too good to be true, it probably isn't", they always think there are exceptions. I also think that the financial crisis is partly to blame on people themselves, who took out a $300,000 mortage when they're income should've only allowed $100,000. We can blame all we want on financial advisers and big shot company exec's, but there wouldn't be a problem if we didn't buy what they were selling.

 
At October 07, 2008 , Blogger Unknown said...

There's an interesting article here:

http://tinyurl.com/4k8am5

From a 'zine that interviewed a hedge fund manager about the subprime crisis before it gained critical mass. The part that applies to expertitis comes late in the article:

"And we all, a number of us thought, "This is just crazy. We should be short. This is a bubble waiting to be popped." But the person who was the expert, the person who ran the sub-prime business, who traded sub-prime paper and issued the CDOs, he was a true believer in the paradigm: "In 2003, people said that the credit quality of the average sub-prime mortgage was deteriorating, and now look, those mortgages have performed fine. The sub-prime market works."

And, hey, he was the expert—you defer to the expert."

The article describes how people at the fund realized that the real estate market was inflated and had bad feelings about it - nobody could be buying all of these new homes, many loans would never be repayed - but they deferred to their expert, who they trusted to understand mortgages better than they did.

Also the interviewee speculates that the experts in this case may have been well-positioned to understand the details of the situation, but lacked the perspective to see a fundamental and catastrophic change coming precisely because they were focused on the details. Worth a read, in my opinion.

 
At October 07, 2008 , Blogger Wesley J. Smith said...

Thanks SparcVark. That looks interesting.

My criticism of expertitis is not, of course, limited to this financial collapse. It carries across the board, particularly in the issues we address here.

 
At October 08, 2008 , Blogger Donnie Mac Leod said...

The fact that the term SUB-PRIME means exactly what it is, is an indication that the borrower is in trouble when he signs the contract where the loaner can up the rate of interest in 5 years. If the person borrowing money is already a SUB-PRIME risk he has compounded his problems the moment he signs the contract & the loaner is also at risk if the market fails and they don't have the capital to cover the losses. Freddie & Frannie were only carrying ON PAPER, enough capital to cover a 3% loss in the market if people were unable to pay their contracts. The whole banking community failed because Government were engineering Sub Prime contracts in a social engineering experiment that was bound to fail and became more complicated because the social engineers couldn't change the course because they were buying votes from an ever widening lower middle class that could not afford homes that the Government forced the Banking Community to negotiate. Franks, Dodd , Acorn type politics and the Congress turned back every attempt to make the borrowers more in line with the money that they could afford. Bush & Clinton both gave a warning but Congress didn't want to change their social experiment which caused this melt down. Although Clinton helped engineer the social experiment with homes for the poor that couldn't get one without sub prime contracts, he eventually realized that Congress was making sure CONTROL over bad loans was being blocked by A Democratic led Congress that failed the people who invested their lives into pension plans that failed along with the failed mortgages. Congress engineered those losses in my opinion. Sadly it appears that the people guarding the hen house are now engineering the Bail out. Also noteworthy that the leaders of the protectionist politics such as Dodd , Franks, Obama and the group (Acorn) that Obama developed to force sub prime loans were destined for big money from Frannie Freddie and in the bailout Acorn was to receive big money on the stroke of a Congressional Pen.

http://www.marketwatch.com/news/story/crl-acorn-still-reap-windfall/story.aspx?guid={EF3547E8-8C23-4CB6-A19A-06C09A8F5BA5}&dist=hppr


The disease that caused this melt down is still alive and well in the US Government's Congress.

 

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