The word this chapter uses four times, rendered above as defect, is the ordinary word for illness, and reading it that way changes the register of the whole passage.
On that reading the chapter is not grading kinds of knowledge. It is diagnosing. Thinking you know when you do not is a sickness; recognising it as a sickness is the treatment; and the sage is not sick because he has performed that recognition. The parallel is medical rather than epistemological, and the chapter's odd insistence on naming the thing as a sickness before it can be cured makes ordinary sense in that frame.
The book uses illness and health language elsewhere in the same way. Chapter twenty-four calls self-display a tumour of an action. Chapter fifty-five says that adding to life is ill omened and that forcing the breath is violence, and calls the harmony of the infant a condition at its height. Chapter fifty describes people who move toward death because they live too thickly. In each case a fault is described as a disorder of a living process rather than as a wrong choice.
That vocabulary is one of the reasons the book was so readily absorbed by traditions concerned with the body, and it also explains a general feature of the text: it almost never blames. A person who thinks he knows is not condemned, and the sage is not praised for virtue. One has a condition and the other does not, and the difference between them is a recognition rather than an effort.