The fallacy of technocratic solutions is that competence alone can improve or perfect a tragically flawed construct of how the world works.  For years the monumental failures of socialism, communism and even fascism were excused by supporters who blamed the executors of the ideal rather than the inherent flaws of the ideology they sought to execute.

Democracy was constrained in the eyes of the modern technocrat because they believed the common intelligence of the voters was unable to comprehend the new complexities that faced the 20th century.  The new age required the expertise of the highly educated technocrats who were able to order a society much more effectively than the plebeians.

This may have been morally justified by considering the disadvantages many faced in a competitive world.  It may have been justified by the erratic behaviors of the economy and the market.  And it may have been justified by the recognition of the higher value of political stability to sustain the environment for capitalism to flourish.

It is the last consideration, which may have the most rational and effective justification for government regulation.  If the purpose of regulation is to create the environment for capitalism to flourish, it becomes threatened when the regulators no longer respected the ideal of capitalism.

These thoughts occur to me as I read the Economist of March 1, 2014.- A Memo to Obama.  It offers rational reform to the Earned Income Tax Credit (EITC), the minimum wage, and disability insurance as a solution to the problems caused by the programs.  All of these programs are well intended but their multitude, their inter-relationship, and the length of their existence distorts market feedback and tends to institutionalize the problems they intend to solve.  There are two problems with these programs:

One is the perversion of incentives.  This may be the marginal tax rate of leaving dependence, which may run over 100% when you include the loss of benefits.  It may be the ease of claiming disability even in an age where safety technology has sharply reduced work place injuries.  The extraordinary growth in the number of workers drawing disability is a hidden welfare system that becomes a thick layer on top of unemployment claims, Medicaid, SNAP programs and other benefits for the unemployed and the poor.

The second problem is the politicization of benefits.  These benefits become tools for attaining political power, and this power often takes priority over human need.  Thus with a record deficit we talk of cutting benefits to the poor but the wealthy still draw government benefits because of their age.  Why? – Because no one wants to face the political fall out of confronting AARP.

The Economist believes that creating a technical bureaucracy out of the reach of short term political considerations will resolve the political gridlock and allow real solutions to flourish.    This is the same thinking that created the Federal Reserve and Fannie Mae. Both have met with some often-neglected successes and some major failures- but few still believe these institutions are free any more from political influence and considerations.

And removing these welfare programs from political influence still does not neutralize the perverse incentives they create.  The politically detached elite may change and even improve these programs and their application, but the perverse incentives will still remain to some degree.  At some points all benefits reach a sustainable limit.  It is beyond naïve to believe these limits will be reached without political controversy.

But the illusion of competence as a solution to a flawed system remains.  Faith in the constitution, the republic, democracy and capitalism may often be tested but so is faith in the bureaucratic elite that believes that stability can be achieved without cost to freedom and growth.  The important question is not so much which system fails more but which system corrects quicker.

Regulators may avoid smaller failures only to lead us to larger failures.  By alleviating small failures we disable firewalls and become inured to risk and cause greater failures.  By reducing the pain of unemployment we risk increasing the pain and the cost of dependency and the inevitable harsh reception of any reform.

The classic economic dilemma of unlimited wants verses limited resources will not go away by transferring decisions from the market to the government any more than by transferring decisions from the elected officials to sequestered bureaucrats.

In a world drowning in data, even the brightest risk seeing patterns that appear logical but lead us to false conclusions.  Competency has become confused with credentialism.  Good intentions pursued by the credentialed, unmoored by either reality or accountability can yield disastrous results.  A political environment, as opposed to the accountability of a free market, only shields the credentialed with the illusion of competence.