Arnold Kling synthesizes Daniel Kahneman and Jeffrey Friedman to excellent effect:
However, I draw different implications from the hypothesis of cognitive hubris combined with radical ignorance. If social phenomena are too complex for any of us to understand, and if individuals consistently overestimate their knowledge of these phenomena, then prudence would dictate trying to find institutional arrangements that minimize the potential risks and costs that any individual can impose on society through his own ignorance. To me, this is an argument for limited government.
Instead of using government to consciously impose an institutional structure based on the maps of cognitively impaired individuals, I would prefer to see institutions evolve through a trial-and-error process. People can be “nudged” by all manner of social and religious customs. I would hope that the better norms and customs would tend to survive in a competitive environment. This was Hayek's view of the evolution of language, morals, common law, and other forms of what he called spontaneous order. In contrast, counting on government officials to provide the right nudges strikes me as a recipe for institutional fragility.