We have recently been reading books that outline the history of economic thinking. During our readings, we have come across prominent thinkers, like Bernard Mandeville, whose ideas were later developed by famous economists like Adam Smith and Frederich A. Hayek. Their argument is simple: Societies are not designed from the top down. They emerge from the everyday actions of individuals, each responding to their own needs, constraints and incentives. No single policymaker, no committee, no ministry can ever fully understand or control this complexity. And when policy assumes otherwise, it begins to fail.

We have long witnessed this in Nepali policymaking. And the sad part is, we still do. Consider what has happened in just the past weeks in Nepal’s education sector. The government moved to regulate private school fees, banning repeated admission charges and ordering refunds of illegally collected amounts. The intention is understandable; education should be affordable, and exploitation should be checked.

But look at what is actually happening. Schools continue to charge fees under different headings. Some local authorities are turning a blind eye to enforced federal directives. The usual response is to blame schools for non-compliance, for greed and for trying to bypass the rules. But very few are asking a more uncomfortable question: Why are schools bending the rules in the first place? Is it simply bad behaviour? Or is it possible that the cost of running a school—paying teachers’ salaries, infrastructure, extracurricular activities and administration—is higher than what the policy assumes? Do authorities understand these realities?

When policies ignore these realities, they do not eliminate the problem but simply shift it. Schools adapt, in this case by re-labelling charges or finding workarounds. The result is a system that still functions but in ways that are less transparent and harder to regulate.

Policy misalignments have also occurred elsewhere. Take public services. A blanket decision to close services on weekends may make administrative sense, but it ignores the unpredictability of human need. Illness does not follow office hours. As a result, citizens are facing long queues and delays in public hospitals. This has caused frustration towards health service providers. For many, this might push them towards informal providers.

In each of these cases, the logic is the same. The state has tried to impose order from above. Though intended to correct structural issues, the policies end up reshaping public behaviour around a new problem rather than resolving it. People adjust, adapt, and, when necessary, bypass the system.

Schools continue to operate. Patients still find care. Markets still function. Life goes on. People adapt because they have to. Schools and parents find ways around regulations. Patients seek alternatives when public systems fall short. Businesses adjust to survive. The system ‘works’ but unevenly, inefficiently and often unjustly.

This tension is not a flaw in human behaviour. It is the predictable outcome of systems that ignore how people actually live. The resilience that we see can therefore be deceptive. It creates the illusion that we are only one policy away from fixing things. That with the right rule, the right directive or the right leader, complex problems can be solved. They cannot.

This is exactly what Hayek warned about: The ‘pretence of knowledge’ or the belief that policymakers can design systems as if they fully understand them. And in the process, they create unintended consequences that cascade through complex systems, distorting incentives, misallocating resources, and ultimately producing outcomes that are often the opposite of what was intended.

Hayek would argue for humility in recognising the limits of what policymakers can know. Bernard Mandeville would remind us to trust society, that individual actions, even when self-interested, can produce broader social outcomes. It is in this space that institutions begin to work more effectively. Take, for instance, PABSON’s decision of private schools providing free education to children from sukumbasi backgrounds. The motivation may well include reputation or marketing, but the incentive still delivers a meaningful public good.

The task, then, is not to have more control. Policies must start from reality, not theory. They must account for incentives, costs and behaviour. Let the schools, hospitals and people decide what is best for them. Because people will always act in their own interest, we should avoid constantly trying to fight against them, but rather build systems designed to channel those actions towards the collective good. Until that alignment is achieved, Nepal’s policies will continue to look good on paper and falter in practice. And that is not a failure of people. It is a failure of design.