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The Wisdom of Crowds

(As appeared on our July 2017 Newsletter)

I take my title from a 2004 book by James Surowiecki. Its subtitle was “Why the Many are Smarter than the Few”. It is an interesting book focusing on examples where the average result of many relatively untutored opinions can lead to quite accurate results. (Guessing how many sweets in a jar for example.) But I want to take quite a different tack on this subject.

When we talk about how “smart” someone is, the key question is what are we suggesting they are smart about? In deciding whether to defer to “experts” or not, this is important. When you board an aircraft, you do not expect the engineering solutions for flying to have been decided by ballot amongst the passengers. You defer to an engineering expert because they know more about this issue that you or any other random passenger does. You do not feel annoyed that your view has been ignored. In this case the “crowd” would not be at all wise. Indeed its “wisdom” is to know that it is ignorant.

Yet it has become recently fashionable in Europe to argue that the general public are tired of “experts”. I do not believe this means that passengers want to take over the design of aircraft. I believe it is a different type of “expertise” that is causing concern. Rather, my hypothesis is that many are rejecting the pretence that elite governing groups know what is best for us, the general population, in areas where we do have expertise. And the key area where we have expertise is our own preferences.

We may not know how to calculate the aerodynamic lift achieved by a certain design of aircraft wing, but we do know whether we would prefer to go on holiday to Japan or Indonesia. You may find this laughably obvious, yet a large segment of what today is called “public policy” involves substituting the judgments of officials for the individual preferences of members of the general population. This substitution of preference can be direct and obvious, such as the long standing ban of marijuana in many countries, now being removed at long last. More subtly it happens indirectly, when the government itself decides to provide services to the public, funded by taxation or borrowing. The most widespread examples of this are healthcare and education. These public policies have of course been implemented for well meaning reasons. Yet the result is the virtual elimination of choice of the type of service you, as consumer, may prefer. State service tends to be monolithic and imposed by a centralised bureaucracy. For example, in many countries the education syllabus is the same for all children. Even the style of teaching is often mandated by a central authority. Typically teacher training itself is monolithically imposed, so all teachers teach the same syllabus in the same way. Health care is similar. One size fits all. Policies for trading off cost against patient need for example will be imposed as a single set of guidelines.

Beyond the style and content of service delivery (i.e. the quality), the quantity of public service is also usually centrally controlled and planned. In the private sector by contrast, there is no plan. The number of restaurants in Hong Kong is (if we set aside the impact of building use controls) a consequence of the scale of demand. Too many restaurants and profits will fall and operators close; too few and the business opportunity will attract more entrants. On average and over time, supply will tend to match demand. The public sector, however, has neither a profit test nor price incentives to match demand and supply. The number of school places or hospital beds is determined by government planners. Because both are close to free at the point of use, demand will typically overwhelm supply. People will naturally demand large quantities of free goods. Rationing of supply will still take place; not by price but by queuing. Waiting times for hospital beds will lengthen. Public housing is another example of this of rationing by queuing of heavily subsidised goods or services. Yet if citizens were faced with the true cost of hospital treatment or of education places, they may make different decisions. The preferences of people individually are being masked by free public provision.

In many parts of the world today, for example there may be “too much” tertiary education, in the sense that people would not find the cost worth the result if they had the choice of whether to pay that cost or to put the funds towards something else they desired more (for example starting their own business). Interestingly, the policy of student loans may be starting to limit ever increasing demand, yet the perverse policy response in many places is to suggest doing away with loans completely and making tertiary education completely free, so removing any market test of demand.

Imagine instead, diverse education and healthcare sectors. Different types of operators; different styles of service delivery. Not funded by taxation but provided for a fee. Each of us could choose where we want to spend our dollars, and how much to spend, based not only on value for money but taking account of what else we might choose to spend those dollars on. (Please note, this is a quite separate matter from how the poorer sector of society can afford either education or health care, my focus here is on who provides the service and with what diversity, not how it is funded. That’s an issue for another article!)

While health care and education are perhaps the most obvious examples where public planning of resource provision has overwhelmed individual choice, they are far from the only sectors of daily life which see this effect. Take the current example of the taxi industry and Uber (or indeed other ride sharing services). The government through its “public policy” on transport, imposes on all citizens the single option of the regulated taxi industry. For 30 years even the cars used by taxi drivers have been essentially unchanged; the “quality” is uniform, the prices imposed, the supply restricted. In this case, even where the preferences of individual citizens have been laid bare by the large numbers of drivers and customers that have used the Uber platform, the “public policy” decision by the government is to ignore those expressed preferences and prevent citizens from making their own choices.

Notice that apart from the loss of liberty for citizens to make their own choices that results from this, a further obvious negative outcome is planning failure. 100 years after the advent of the planning debacle that characterised Soviet Russia, many people still believe central planning makes sense. And they express puzzlement when it goes wrong. A number of recent articles in the press have bemoaned the waiting lists in hospitals, for example. Why can’t government get this right they complain? Yet many of the same commentators will rail against Mainland China’s excess capacity in steel; itself an example of central planning gone wrong. Central planners never have enough information about preferences, that are constantly changing, to plan effectively. Only markets can align diverse preferences with supply. These failures to allow individuals to exercise their own preferences and decide their own trade-offs between services they want and their capacity to pay for them, never seems to dampen the optimism that  somehow, next time the planning will work.

Our government has been busy planning our retirement savings for a while now. Deciding how you should save; how much your employer must contribute to that; how the retirement funds should be managed; what sort of scheme choices you should have, etc. If only people and indeed companies would conform with the government’s ideas of how we should save for our retirement, then all will be well, is the policy implication. A hundred years of policy failures notwithstanding, the idea of allowing individual citizens to make their own choices based on their own preferences is always rejected by the planners.

Instead of the wisdom of crowds, we have the ignorance of the planners. Which do you prefer?

Nick Sallnow-Smith

Chairman

The Lion Rock Institute

群眾的智慧

文章標題取自James Surowiecki 2004年的一本著作。副標題為為何大群比小眾更為有智慧。這一本書籍著眼於很多有趣的論點,例如很多時候相對較低學識的意見都能帶出準確結果。(例如猜測罐內糖果的數量)但這次我想從另一個角度談這個題目。

當我們談論一個人有多聰明時,最關鍵的問題是他聰明在那一個範疇。這個問題在決定這種聰明何時能定義為專家尤為重要。例如你乘坐飛機時,你不會讓乘客投票去決定航機的飛行技術問題。你會讓專業工程師去處理,因為你知道他的相關知識比你或其他乘客為高。你不會因為你的意見被忽略而懊惱。在這個情況下群眾不一定是最明智的。所謂的智慧都可理解為愚昧的。

然而歐洲最近有股潮流爭論關於公眾對專家厭倦的說法。我不相信他們認為乘客應取代成為航機設計者。我相信他們是指另一重專家。我認為他們所拒絕同意的,是管治精英們知道什麼是最好這個說法。因為對於關鍵的事情上,我們對於自己的偏好才是最專業的。

我們可能不知道如何計算空氣動力學上怎樣的設計能把飛機升起,但我們肯定知道自己喜歡去日本還是印尼作旅遊度假。你可能覺得理所當然得可笑,但現今很多的公共政策上官員的決定的確是漠視了大部份市民的偏好。這些沒有民意基礎的政策往往都很直接及理所當然的,例如:很多國家長期禁止大麻的使用,縱使很久前已取消限制。但最微妙的是,這些政策背後是由人民的稅收或貸款所支持。醫療及教育是最多人爭議的例子。這些政策當然是利用了一些很好的借口去落實。但實質上是剝削了消費者對服務的選擇權。國家往往就利用中央官僚的做法,把所有服務都變得一式一樣。例如很多國家把同一個教育大綱使用於所有的小孩身上。連教學方法都強制成一式一樣。甚至連教師所接受的培訓也規範了,所有教師都用同一個方法去教同一個範圍。醫療政策也一樣。所有人都穿著同一個尺寸。利用同一套醫療成本的政策對待所有不同的病人。

除了在服務的形式及內容以外(例如服務質素),公共服務的數量通常也是被中央控制及規劃了的。在私營市場上,由於沒有規劃,就形成很大的對比。就像香港餐廳數量一樣(如果我們不計算建築物的使用限制),其實需求很大。如果太多的餐廳營運會導至盈利下降甚至結業,但太少的餐數量則會吸引商機。隨著時間,供應會跟隨需求而自動調節。但是在公共政策範疇,就沒有利潤或價格誘因去調整需求及供應。學校地點或病床數量由政府擬定。由於使用者是以近乎免費的情況下使用,需求往往壓倒性地多於供應。人們對於免費物品的需求很大是很自然的事。供應的調節其實都會出現,但不是以價格,而是以排隊方式。醫院的輪候時間會增長。另一個因為過份補貼而以排隊代替價格調整的例子就是公營房屋。然而如果市民需承擔醫療或教育的真正開支,他們便會作出很不同的決定。其實,人們的個別偏好被免費的公共規定蒙蔽了。

今天在世界上很多地方的人們,可能因為高等教育過剩,都不去查找所花的成本是否有相對的回報價值而去決定是否投放該資源,還是把資金用作自己更想要的投資(例如開展自己的生意)。更有趣的是,學生貸款政策可能開始對學位濫用有一定程度的阻力,然而很多地方的政策建議取消貸款制度令高等教育完全免費,取代了市場調控需求的能力。

想像一下,如果教育及醫療能夠分散。不同類型的營運者,不同的服務型式。不是由政府資助而是以收費方式提供服務。我們可以選擇在那裡消費,消費多少,除了基於其價值,更可有不同的選擇。(請注意,在此我是在談論這些教育及醫療服務由誰來提供,而非討論貧窮人口如何負擔這些費用或應如何資助。這需要另一編文章作討論!)

當醫療及教育可能是突顯公共政策中央規管化如何剝奪選個人擇權,但日常生活中還有很多範疇有着同樣的影響。就以最近的士及優步UBER為例(或者說共乘服務)。政府通過交通公共政策令市民只有的士這個單一選擇。在過去三十年來,的士所用的車款都差不多沒有改變過; 服務質素一式一樣,價錢已規定,供應有限。縱使有很多司機及乘客的意見都表示希望可以使用優步這個平台,政府的公共政策仍是把這些希望可以有自我選擇的意見聽而不聞。

大家要明白如同一個市民因自由選擇錯誤會遭到損失,一個錯誤的規劃同樣會帶來負面結果。蘇聯規劃失敗的一百年後,很多人還是認為中央計劃是合理的。他們對於整個錯誤覺得果惑。最近有報章哀嘆公立醫院的等候列表時間都很長。又慨嘆政府為何不能將之改善。然而,中國的龬鐵產量過剩是另一個中央規劃錯誤的例子,很多評論家又會懂得反對。中央規劃者從來對於市場偏好及變化都沒有充足的信息。只有市場才能利用供應把需求平衡下來。即使失敗,人們都能因應自己的喜好及支付能力去調節下一個交易的決定,而不會因而認為因為失敗而需要中央規劃下一個交易。

我們的政府為我們規劃的退休金儲蓄已經一段時間。我們儲多少、僱主負責多少、儲蓄如何管理、可以選用什麼儲蓄方案都被規定了。如果所有的人們及公司想要的退休儲蓄計劃跟政府的規劃是一致,這個政策當然是好事。但縱使百多年來的政策都是失敗的,但規劃者仍拒絕讓市民自行基於自己的情況去選擇。

相對於計劃者的無知,我們可選擇群眾的智慧。你的選擇那一種?

作者:Nick Sallnow-Smith

翻譯:Joe Chan