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I seem to remember the story being named "Limiting Factor", but the descriptions do not match. Earth explorers find a planet where here are crocodile-like beings lazing in a sunny swamp. Suddenly a little man with seemingly magical powers appears and tells them a tale of a planet where Luddites and Morlock types split apart. The Luddites developed their psychic abilities to the fullest. The punch line is that the meditating crocs are the psychic wizards and the little man with far greater abilities is using a little technological gadget. The Luddites reached a Limit.

  • I seem to remember the story being named "Limiting Factor", but the descriptions do not match. Are you aware that there are two sci-fi stories with that title? The 1954 story by Theodore Cogswell (available at the Internet Archive) which more or less matches your description, and a 1949 story by Clifford Simak which is completely different? (The title was used again for a 2015 story by Romana Drew, but I think we can ignore that one.) – user14111 May 17 '17 at 2:02
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Could this be "Limiting Factor" by Theodore R. Cogswell?

"Oh, you wouldn't be doing that," said Mr. Thwiskumb mildly. "Those people down there aren't Ordinaries."
"What!"
"Dear me, no. They weren't the ones that were left behind. They are the descendants of those who migrated. Those poor devils down there are pure-blooded Superiors. When they ran into the limiting factor, they just gave up." "Then what accounts for you? You're obviously a Superior."
"That's a very kind thing to say," answered the little man, "but I'm just as ordinary as anyone can be. We're all Ordinaries where I come from. Our Superiors left a long time ago."

and

"There is an old story in our folklore," he continued, "about a boy who bought himself an animal somewhat like your terrestrial calf. He thought that if he lifted it above his head ten times a day while it was little, he would build up his strength gradually until he would still be able to lift it over his head when it was a full-grown animal. He soon discovered the existence of a natural limiting factor. Do you see what I mean? When those people down there reached their natural limits, there was no place for them to go but backward. We had the machine, though, and the machine can always be made smaller and better, so we had no stopping point."

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