We denizens of modernity overestimate ourselves. As individuals, we are not close to being as intelligent, as reasonable, or as capable as we suppose ourselves to be.
Our overestimation of our abilities is understandable. Every day of our lives we see automobiles whiz by, hear jetliners soar overhead, and enjoy the convenience and cleanliness of indoor plumbing, electrification, and artificial lighting. When we pause to notice, we marvel at antibiotics and other blessings of modern medicine, and rejoice at the abundance available in supermarkets and from online merchants. Literacy rates are very high. Even routine space travel might become a thing within the next decade or two.
What an impressive species we are!
We today are indeed impressive as a species (at least compared to every other species that we know). But what’s impressive isn’t so much our individual intelligence and abilities. What’s impressive is our ability to share knowledge across time and space in ways that leverage the modest and diverse talents of each of us into magnificent outcomes that not even the most intelligent of us could have designed or can now fully comprehend.
From the mundane pencil to the James Webb Space Telescope – from your buying a meal prepared at a local restaurant to your buying an automobile manufactured in Japan – the goods, services, and experiences that distinguish us from our ancestors are products of incredibly complex patterns of human cooperation.
This cooperation ‘works’ in part because it doesn’t require that any one person know more than can be known by the typical human being. Each of us possesses our own unique bits of knowledge that we are prompted to combine with the unique bits of knowledge of other individuals. If the incentives are ‘correct,’ this cooperation builds institutions and material processes that yield the abundance that we moderns take for granted. Someone who knows how to explore for iron ore agrees to cooperate – as an employee, as a business partner, or in some other contractual manner – with someone who knows how to smelt the ore. Someone else then joins the cooperative effort by purchasing the iron and turning it into patio furniture. A retailer then cooperates with both the furniture producer and consumers by increasing the convenience for the producer to sell, and for consumers to purchase, the furniture.
The important details of these opportunities are unknowable to anyone not on the spot.
All along the way there are countless other cooperators – truck drivers, insurance agents, financial intermediaries, accountants, lawyers, and the multitude of individuals whose efforts were required to build the electricity-transmission infrastructure. And on and on and on.
Each individual is led to cooperate productively because each individual receives signals that reliably (although never perfectly) both (1) reveal what are the best uses of that person’s time and resources, and (2) incite that person to seize those particular opportunities. By far the most important of these signals is market prices.
Given your talents and interests, you sell your labor to the highest bidder. Given the amount of your savings and your preferences for risk, you invest in those opportunities that you believe have the most promising prospects. Given your income, you buy those goods and services that most enhance your and your family’s well-being. In nearly each and every case, the decision-maker directly and personally enjoys material gains from decisions made prudently, and the decision-maker personally suffers losses from decisions made poorly.
This feedback disciplines decision-makers throughout the economy. With everyone avoiding options that they expect will make them worse off, and seizing options that they expect will make them better off, nearly everyone over time grows materially better off.
Thus, a key to modernity’s economic prosperity is the individual reasonableness that is encouraged by the fact that private decision-making concentrates both its costs and benefits on each decision-maker.
But history, both ancient and recent, provides more than ample evidence that we human beings are highly prone to thinking and even acting unreasonably when we don’t personally experience most of the costs and benefits of our decisions as individuals.
Start with a piddling example. If I get some pleasure from believing that the ghost of my dead mother enjoys hearing me sing while I’m driving, there’s no real barrier to my holding and maintaining that belief. Although indisputably unreasonable, I suffer no material harm from clinging to this superstition. Matters would differ, however, if my belief were instead that the ghost of my dead mother enjoys seeing me drive with my eyes closed. Because the personally experienced material cost to me of acting on this belief would be quite high, I’ll not adopt this superstition. In the latter case I’m made reasonable by easily anticipated personal consequences.
I submit that we humans are naturally unreasonable and are made reasonable only by – and only when and to the extent that – we as individual decision-makers personally experience material consequences of our actions. And the more direct and indisputable is the connection between our actions and the personal consequences experienced by each decision-maker, the more ‘strict’ is the resulting reasonableness.
To collectivize decision-making, therefore, is to remove individuals from situations that alone compel them to act reasonably. Collective decision-making protects each individual decision-maker from personally and directly bearing the bulk of the ill consequences that spring from his or her poor decisions. Likewise, collective decision-making denies to each individual decision-maker the ability to personally and directly reap the bulk of the good consequences that spring from his or her prudent decisions. The result is that every individual chooses and acts unreasonably. And as is brilliantly explained by my colleague Bryan Caplan in his 2007 book, The Myth of the Rational Voter, the collective results of this bacchanalia of unreasonable decision-making are consistently undesirable, even from the perspective of the individuals whose (unreasonable) decision-making generated the results.
Collectivizing decision-making isn’t the only source of separating each individual decision-maker from the material consequences of his or her decision. Another source of separation is time. The longer is the time between an action and that action’s results, the less able is the decision-maker to connect the results to the action confidently.
Consider the decision to receive a particular medical treatment. Each patient has strong personal incentives to make those medical decisions that will best promote his or her health (or that of his or her children) over time. But if the promised benefits or the potential burdens (or, especially, both) of some treatment are spread out over years, the information available for deciding for or against the treatment is less than if all the benefits and burdens are immediate. When the benefits and burdens are revealed quickly, one simply need observe those persons who’ve already received the treatment. Not so when revelation of information of the full benefits and burdens takes a long time.
Absent such direct information about the treatment’s consequences, each patient must rely mostly on the integrity, competence, and judgment of his or her physician, along with whatever assurances are perhaps offered by regulatory bodies and the legal system.
In most cases such reliance works well enough. When my ophthalmologist assured me in 2018 that the artificial lenses she was to put into my eyes following cataract surgery would improve my vision for many years without posing much downside risk, my confidence in her judgment prompted me to get the surgery. (So far, so good!)
But suppose that a novel eye disease emerges, one that physicians have no experience in treating. Regardless of my ophthalmologist’s skills, and no matter how sober I am in choosing to accept or reject a proposed treatment, my ability to reason will not lead me as confidently to a particular decision as it does when the question involves diseases and treatments that are more familiar. The decision-making challenge grows if the progress of the novel disease, and the full consequences of the proposed treatment, reveal themselves only over a long span of time. Under such circumstances, the range of attitudes of reasonable individuals is bound to be unusually wide, as is the range of their decisions. To mistake this observed disagreement as evidence of intellectual intransigence or ideology-fueled biases would, of course, be mistaken.
Among the greatest challenges we moderns face is to recognize the severe limits of our knowledge and reason. We are indeed smart and reasonable, but typically only when we each personally experience, in unambiguous ways, a significant portion of the material costs and benefits of each of our choices.