I was recently listening to President Trump’s proposal to change U.S. immigration laws and how they would somehow help the economy.
Well, Sheldon Richman puts into words better than I could what this amounts to:
Immigration brings out the social engineers and central planners across the political establishment. We see this clearly in the debate over Donald Trump’s support for legislation that would cut legal immigration in half while tilting it toward well-educated English-speakers and against low-skilled non-English-speakers. . . .
But what is this thing they call “the economy,” which has needs? Social engineers of all parties and persuasions talk as though an economy is some kind of mechanism to be centrally fine-tuned and overhauled occasionally according to a plan. Even those who style themselves free enterprisers display the central-planning mentality when it comes to immigration.
Contrary to this establishment view, the economy is not a mechanism. It is, rather, hundreds of millions of American producers and consumers, who also happen to be embedded in a global marketplace. Why can’t they be trusted, without the direction of politicians, to decide for themselves what they need and to engage in social cooperation — that is, among other things, to trade goods and services — to obtain it?
A. Barton Hinkle:
Last weekend, president Nicolas Maduro used a sham election to consolidate power, and by Tuesday armed thugs were rounding up opposition leaders. This is the all but inevitable outcome of the Venezuelan government’s economic policies, which have driven the richest nation in Latin America — a country with more oil than Saudi Arabia — into shocking destitution.
And Darío Paya, former Chilean ambassador to the Organization of American States:
“Populists and socialists destroy their societies in predictable ways. It’s not like one day a populist gets up and says, ‘I’m going to ruin this country.’ Rather, he starts out wanting to spread the wealth and finds that the easiest way to hand out cash is by simply printing lots of it. Which creates a new problem: As the currency weakens, prices rise. But the populist finds there’s an answer for that too. If bread is getting expensive, he can fix its price, and he gets to vilify the baker as a greedy capitalist.
“But then the baker stops producing bread because he can’t afford to make it, what with the rising price of flour. And so what does the populist do next? He fixes the prices of flour. When that doesn’t work, the politically expedient thing to do will be to take over the bakery and the farms and hand them to the folks in the party’s local committees, who prove to be rather less apt at farming and baking. …
“And if violence does erupt, it can be denounced as the doing of enemies of the state and used as a pretext for renewed crackdowns: ‘We’re going to tell the imperialism and the international right that the people are present, with their farm instruments in one hand and a gun in the other,’ Maduro told a Caracas crowd. And soon, Mr. Populist finds himself with a good reason to suspend the country’s constitution. Thus does a tyrannical attitude toward the shop-owner selling bread lead to a tyranny over a whole nation.”
I recently heard the radio advertisement from the United States Department of Agriculture (USDA). The tagline is “we know what’s best”.
How creepy. Worse, the supposed experts — NOT — suffer from the fatal conceit as explained by Friedrich A. Hayek. Here’s an appropriate quote from the book:
“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
The average 56-year-old couple pays about $140,000 into the Medicare system over a lifetime and receives about $430,000 in benefits back. The program is also completely unaffordable. Medicare has unfinanced liabilities of more than $30 trillion. The Medicare trustees say the program is about a decade from insolvency.
David Brooks, thinks Republicans are channelling Friedrich August Hayek. If only. For an illuminating discussion of decentralized decision-making see this video. Click on the cc on the menu bar to the right of the volume icon.
Why? Are the busybodies there afraid someone, somewhere is making money? As long as the parties consent to the transactions, it’s not the SEC’s business.
Are they afraid of fraud? Valuing the shares of the firms being traded is a judgment call. It is implicit that either the buyer or the seller knows more than the other. At the least, one side views the information differently that was used to make the decision. That is always present for any transaction.
Matthew Continetti provides a good Hayekian understanding of the dispersed information and complexity of an economy.
Fighting a recession is not the same thing as fighting a war. The U.S. military is a hierarchical organization in which orders are dispersed through a top-down command structure. Every soldier has an assignment, with every assignment comes orders, and if a soldier does not follow his orders, he’s in a lot of trouble.
The economy is different. It is not a closed system like an armored cavalry regiment, where everything (and everyone) has a place. The economy is open and dynamic, the agglomeration of billions of individual consumers and producers and investors. An army belongs to a particular nation, but today’s economy is global: The high price of Japanese money lowers the cost of German exports, which depresses American manufacturing, which increases demand for Chinese imports, and so on. An army has officers who process and analyze the available information, then plot strategy accordingly. It is impossible to do this in an economy. There is too much information for a single mind, or a group of minds, to comprehend. And there is no way to know for sure which strategies work and which do not—or whether a strategy had any effect in the first place. An army fights and destroys an enemy. But who is the economic enemy and how does one “defeat” them? When Obama said “our troops are the steel in our ship of state,” he rightly implied that he, as commander in chief, is the ship’s pilot. But the economy is not a ship. The economy has no captain.
The equivalence between recession and war is what’s gotten Obama and the Democrats into so much trouble. Liberals like the president and the congressional leadership honestly believe that they can command the economy to recover. By pushing and pulling the correct monetary and fiscal policy levers, the Democrats say, government can manipulate aggregate demand and bring back jobs. By redistributing wealth and regulating the insurance market, the Democrats promise, Americans can achieve universal health care while reducing health spending. By delegating authority to unelected bodies and issuing hundreds of new rules, the Democrats believe, regulators can eliminate credit bubbles and financial crises.
But it’s not that simple. The economy and society are too complex. Expert knowledge is too limited. The science of economics is too primitive. Ordinary human beings do not respond like soldiers to government’s commands. Nor should they respond to government this way.
The economy is more like nested hierarchies but getting flatter all the time. Most corporations, from small to large, have hierarchies but they are dynamic. They adjust to the world around them.