If only the chairman of the House Financial Services Committee would exercise that bit of economic humility every time he and his colleagues attempt, and continue to attempt, to legislate the economy into the image of their choosing.
"In the first place, nobody knows..." (Emphasis added.) Now that Mr. Frank realizes the futility of predicting unemployment rates, let's hope he realizes the futility of controlling the economy in general.
Historians and economists who take history and the lessons of basic economics seriously take considerable time trying to convince us that "nobody knows" enough information to command and control economies. The lesson of history is this: Since there has never been a person or group of experts endowed with both the intellectual powers and angelic nature it would require to wisely and justly plan the choices before millions of people seeking to buy, produce, and create wealth, the market is better left unplanned by central authorities, politicians, and bureaucrats.
When politicians take it upon themselves to order the economy through excessive regulation and historically short-sighted legislation, consumers and producers in society (the rest of us) become less free to interact in our respective self-interests. When this happens the overall productivity and dynamics of the market suffer because the capital in the market is not efficiently directed where it should be.
Thomas Sowell reminds us: "The efficient allocation of scarce resources which have alternative uses is not just an abstract notion of economists. It determines how well or how badly millions of people live." (Basic EconomicsWho, then, "knows"? Who is capable of making these decisions that determine the material welfare of millions of people?: A Citizen's Guide To The Economy)
You know. You neighbor knows. That cousin whose name you cannot remember when you see him every seven years at a family reunion knows. We, the market, know best.
When politicians express no confidence in the "private sector" or "the market" and attempt to regulate the economy in the direction of their choosing, they are presuming to have the knowledge it requires to do so; they are distrusting We The People of The Market with the freedom it requires to function a diverse market economy.
True, "nobody knows" what the unemployment rate will be in six months, but somebody does know how to run the market. And that somebody is us, uncoordinated and pursuing our respective self interests, not a group of preening economic divines inside the Beltway.
In his classic work, The Road To Serfdom,
F.A. Hayek carefully explains that the central characteristic of the authoritarian regimes of twentieth-century Europe was an outright rejection of the unplanned, free market activities of nineteenth-century classical liberalism. This authoritarianism resulted from the desire to move all decision-making of the market to government central planning boards.(Hayek also wrote a book devoted solely to the fallacy of central planning by a group of elites, properly titled, The Fatal Conceit
) In chapter 5, Planning and Democracy, Hayek explains:
“That our present society lacks such ‘conscious’ direction toward a single aim, that its activities are guided by the whims and fancies of irresponsible individuals, has always been one of the main complaints of its socialist critics.”The more our "whims and fancies"--freedom, that is---annoys the elites in Washington, the better. The more they act on their annoyance, the worse off we become, materially and politically.
The more of the economy that is diminished by government control, the less free we are as the market to determine our respective welfare. And the less free we are individually, the less prosperous we become as a society.
This much history tells us, and this much we know. Acting contrary to this knowledge would be just plain "dumb."
