People are stupid

Stopped by youtube today and this video was on my front page. I posted this comment on his video that I liked and wanted to save here.

Your conclusion that libertarianism doesn't work is based on the premise that people are stupid.  And that premise is true but misleading.  Some people are stupid across the board, but those people are pretty rare.  Generally, most people are smart in areas where it matters to them and ignorant in areas that don't.  In "The Use of Knowledge in Society", Hayak described this as "the particular circumstances of time and place". It's also called, "the local knowledge problem." Which is to say that markets excel where local knowledge can be used efficiently.

An example: imagine a parts assembler who works for a machine manufacturer.  Imagine that the assembler is taught that the optimal placement of the tools he's not using is at some location. Let's call that spot "location X".  But in his part of the shop due to forces that no one could have imagined, location X has a lot of vibrations. And it causes his tools to fall a LOT causing the worker to be less efficient because he's constantly stopping to pick up his tools. So the worker decides to place his tools at some other spot, (location Y) that is much more stable but not as convenient as location X.

Now it's too easy for someone far away evaluating that worker to conclude that he's an idiot because he doesn't put his tools in the optimal spot he was taught. But what's really going on is that the worker is exercising knowledge of the particular circumstances of his work place. And what looks idiotic from afar is actually optimal when local knowledge is accounted for.

IMHO, most of the claims that "people are stupid" are of this type. We look at people far away from us and do not understand why they do what they do and proclaim that they are dumb. But what's really going on is that we are arrogant in presuming to understand all the local knowledge that they take advantage of but that is invisible to us.

I wonder how often we'd conclude that people are stupid if we were a little more humble about what we presume to know about them.