Monday, January 26, 2009

Even the economists have lost their heads

Robert Samuelson makes a lot of scary sense in this column ( ; but the scariest thing in the column is his opening phrase.

"We all want President Obama to succeed in reviving the economy. . ."

That phrase indicates that even this top notch economist has been panicked into completely misunderstanding the problem. Ultimately President Obama can't "succeed in reviving the economy." At best he can limit the damage that the government will do to the economy as it flails around rapidly printing money and wildly spending future tax dollars doing things that make it look like the the politicians down in Washington are doing something they believe will be helpful.

No politician can revive the economy. The market economy that has made us all so unbelievably wealthy is so complex and interdependent that tinkering with it is almost sure to make things worse. Economic activity will slow to a bottom no matter what the government does; and economic activity will eventually bounce back from whatever bottom it reaches no matter what the government does. Almost any action likely to be decided upon in the great sausage grinding machine down in Washington will make things worse. The more intervention there is the slower the real economy will revive and the less fast it will grow.

At their very best the wisest politicians in Washington will be like moderately thoughtful teenagers shaking a stopped precision watch in the hopes of making it run better. At their worst the mostly dim witted politicians in Washington will be like impatient nine year olds prying open such a watch and pulling out its gears while indulging in the fantasy that they can reassemble it. I doubt that one in ten of the politicians down there has any understanding of the complex workings of the system that reliably delivers eggs, bacon and grits to their breakfast table. I'm certain that not a one of them has any appreciation of the complexity and sensitivity of the system that reliably delivers over a million of ten thousand different kinds of parts to the factories that assemble jumbo jets.

George Will did a column some time ago ( that gives some sense of what I mean about complexity. Will wasn't being especially original in this column because a long time ago Milton Friedman used the same example in his book Free to Choose, and Adam Smith, of course, wrote similar things first a couple of hundred years ago in The Wealth of Nations.

1 comment:

Anonymous said...

Excellent post with two very good articles. Of course, there are an awful lot of liberals who would be left sputtering at the suggestion that you don't need the government to make a pencil.

Thought I might leave you with a couple of cute pieces written by Robert Higgs: