The chapter is four short clauses and they turn on a single distinction. To know that one does not know is best. Not to know and to think one knows is a defect. Only by recognising this defect as a defect can one be free of it. The sage is free of it because he recognises the defect as a defect, and that is why he is free of it.
The repetition in the last two clauses is not padding. The chapter is describing a condition that is cured by being identified, which is unusual, and the doubling enacts it: the statement has to be made twice because the recognition is the remedy, and there is no further step to describe.
That structure explains why the chapter sits where it does. The book is generally suspicious of accumulated learning, and chapters forty-seven, forty-eight and sixty-five have all said so in different registers. This chapter is what stops the group from amounting to a rejection of knowing as such, because it praises a specific piece of knowledge very highly and calls its absence the one thing wrong with anybody.
The defect named is not ignorance. Not knowing is the ordinary human condition and the chapter does not treat it as a fault. What is faulty is the second-order error of taking oneself to know, and the chapter treats that as the only illness worth naming.
There is no elaboration, no example and no application to government, which makes this one of the very few chapters that address a reader as a private person with nothing else attached.