That’s the topic of Thomas Sowell’s column today. For example, parents who homeschool their children often are very successful in that endeavor even though they don’t have any professional education training, whereas teachers in the public schools — all highly trained professionals — often have very poor success with their students.
Similarly, under “planned” socialist economies, investment and production decisions are made by professionals, while under free market economies, such decisions are left to millions of individuals, most of whom cannot be said to have any professional expertise. And yet the latter consistently outperforms the former.
Surprisingly, Sowell doesn’t go into the key reason why this is so — a point he has often made before. When decision-makers will either benefit from good actions or suffer losses from bad ones, we tend to get good decisions. Conversely, when the decision-makers don’t bear the cost of their mistakes, we tend to get a lot of bad decisions. In education, homeschooling parents have a very strong incentive to make certain their children really learn their 3 Rs and much more. In public schools, however, the money keeps pouring in whether or not the teachers succeed in teaching the students. When it comes to investment and production, the millions of individuals who invest their money and run businesses large and small, all stand to gain if they make good decisions and to lose if they make bad ones.
In short, incentives matter far more than professional credentials.
