links for 2010-10-09
links for 2010-10-09

Will Wilkinson Is Trapped in a World He Never Made...


Will Wilkinson writes:

The corruption of economics: Larry Summers: neo-Keynesian aristocrat: Keynesianism tells us market economies will run themselves into the ground without expert government intervention. This strongly encourages the idea that elite academic macro- and monetary economists constitute a sort of secular priesthood. Only they are privy to the mysteries of the business cycle. Only they are armed with the esoteric knowledge necessary to tame an otherwise disastrously turbulent economy. It's only natural that these same men and women should be granted positions of considerable powers within government. It's only natural that they should be called upon as invaluable, and thus handsomely compensated, expert advisers to the nation's largest private financial concerns. And this is a recipe for corrupt and/or dangerous conflicts of interest. 

Unfortunately, it is a fact that--as Milton Friedman was the first to admit--market economies regularly run themselves into the ground without expert government intervention. (And they also run themselves into the ground with depressing but less frequent regularity with expert government intervention.)

As some guy once wrote:

Let us clear from the ground the metaphysical or general principles upon which, from time to time, laissez-faire has been founded. It is not true that individuals possess a prescriptive ‘natural liberty’ in their economic activities. There is no ‘compact’ conferring perpetual rights on those who Have or on those who Acquire. The world is not so governed from above that private and social interest always coincide. It is not so managed here below that in practice they coincide. It is not a correct deduction from the principles of economics that enlightened self-interest always operates in the public interest. Nor is it true that self-interest generally is enlightened; more often individuals acting separately to promote their own ends are too ignorant or too weak to attain even these. Experience does not show that individuals, when they make up a social unit, are always less clear-sighted than when they act separately. We cannot therefore settle on abstract grounds, but must handle on its merits in detail what Burke termed: "one of the finest problems in legislation, namely, to determine what the State ought to take upon itself to direct by the public wisdom, and what it ought to leave, with as little interference as possible, to individual exertion..."

Thus, to me, Will Wilkinson's insistence that we should pretend that we live in a well-functioning organically-grown catallaxy and behave as if we do seems profoundly wrongheaded. It feels to me like a strange confusion of cause and effect mixed with some Ludwig von Mises-Ayn Rand combo sprinkled with American populism that, when mixed together, propel one far into the gamma quadrant. It is true that if we did live in a well-functioning catallaxy, we wouldn't need experts to help us manage the world to attain the greatest good for the greatest number.

But we don't.

And so there is always a flaw. Some people say it is the government. Some people say it is the government plus private fractional-reserve banking. Some people say it is the government plus private fractional-reserve banking plus human compassion.

But the project of getting rid of one or two of those three flaws so that we might then live without needing experts seems gery strange.