Expert Failure and Market Structure

Experts fail when they give bad advice. In its broadest meaning, “expert failure” refers to any deviation from a normative expectation associated with the expert's advice. TWO DIMENSIONS OF EXPERT FAILURE Expert failure is more likely when experts choose for their clients than when the clients choose for themselves. And in broad brush, we may say that expert failure is more likely when experts have an epistemic monopoly than when experts must compete with one another – although the details of the competitive structure matter, as we shall see. In Chapter 5 I noted that the unavoidable word “competition” may easily create misunderstanding. I will use the phrase “ecology of expertise” in part to underline the synecological quality of the sort of “competition” among experts that might help to reduce the chance of expert failure. These two dimensions of expert power suggest the four-quadrant diagram of Table 10.1, which identifies four cases: (1) the rule of experts, (2) expert-dependent choice, (3) the quasi-rule of experts, and (4) self-rule or autonomy. The greater the freedom of nonexperts to ignore the advice of experts, the lower is the chance of expert failure, ceteris paribus . And the more competitive is the market for experts, the lower is the chance of expert failure, ceteris paribus . The Rule of Experts The rule of experts creates the greatest danger. Here, monopoly experts decide for nonexperts. State-sponsored eugenics may be the most obvious example. The state hires a eugenicist to tell it which persons should be allowed to reproduce. I noted in Chapter 4 that we cannot, unfortunately, view this sort of thing as entirely behind us (Galton 1998; Stern 2005; Ellis 2008; Johnson 2013; Shreffler et al. 2015). Of course, eugenic principles were taken to devastating extremes in Nazi Germany. Examples of the rule of experts include more seemingly moderate and reasonable cases of expert control such as monetary policy under central banking. Steven Horwitz (2012) examines this case closely in a penetrating analysis of the history of the Federal Reserve System in the United States.