Obviously, for the second scenario to be plausible, we have to believe that lots of people labeled "expert" are not actually experts.

To a certain extent yes, but from my understanding a lot of it is that the education industry got double helpings of rent-seeking and goodheart's law. For example in many districts unions make it effectively impossible to fire teachers once they have tenure(which is relatively easy to obtain at the k-12 level).
-edit also http://lesswrong.com/lw/le/lost_purposes/