Freedom and Economic Vitality Are Not Compatible with Central Planning


Two examples of the proposition in this post’s title crossed my computer screen this morning.  The first comes from Federal Reserve Bank of Boston President and CEO Eric Rosengren, talking to WPRI’s Ted Nesi:

“One of the advantages of running an economy a little bit hotter – and I would call 4.4% [unemployment] nationally a little bit hotter than normal – is that it does bring these [unemployed working-age] people back into the labor force,” Rosengren said.

“And so that’s exactly what we’re hoping to see, is some of those people that have had a difficult time getting back into the workforce, after a long period of unemployment or other types of issues, able to take advantage of the strong economy right now,” he said.

Note the grammar of that first sentence.  The presumption is that some pointy heads in the Federal Reserve can “run” the economy like a machine.  There are two gigantic risks possible with that attitude.

The first is that they’re running the machine based on the readings of some gauges with no view into what’s going on around them.  If your car had no windows and you found that it wasn’t rolling forward as smoothly as you’d like, pressing the gas might overcome the problem, but it might do so by breaking through a protective barrier along a cliff or rolling over some people who are trying to hold the car back for good reason.  Why are working-age people not entering the workforce?  The Fed’s tools are too blunt to address social issues that require our culture to resolve, and using those tools could actually make things worse.

The second gigantic risk is that the people who run powerful organizations like the Fed will determine to get out of their machine and use it (or the threat of it) to change society in ways that they prefer.  That’s a step beyond which there are no boundaries to totalitarianism.

Another item comes via a commenter called “oceanstater” to Tim Benson’s post here, yesterday:

There is an old saying, if you want less of something, tax it and let the market go to work. We do want less carbon dioxide. As long as the tax is mostly refunded to the populace, seems like a good idea. Those that conserve will come out ahead, those that waste energy will pay.

Of course no one thing will make much difference to the world’s climate, we have to do lot of little things, each one subject to the argument it won’t make much difference.

The first paragraph makes a big error in reasoning.  This tax doesn’t apply just to energy “wasting,” but to energy usage.  Those are different things.  The redistribution scheme of giving much of the money back charges those who must use energy and pays everybody off indiscriminately.  This would be hugely disruptive to the economy, because the economy is largely built on energy.

Indeed, the scheme could actually result in a net increase in the waste of energy.  A company that uses 100 units of energy to keep many people employed and produce something that moves humanity forward already has a profit motive to reduce waste.  On the other hand, a person who wastes the same 100 units would, under this carbon-taxing proposal, be receiving a subsidy from the government to actually decrease incentive to conserve.  That is, however much he or she might conserve if the price simply went up, he or she will have to conserve less because the government is redistributing wealth from those who can’t conserve to those who either can or don’t care.

The second paragraph makes the error of taking the cost of a minor step for some (assumed) improvement and measuring it against the major rationale for the theoretical worldwide fix — presenting the marginal harm of a local policy against the end of the world.  But that’s not the balance.  What one really must balance against the (speculative) effects of global warming in the long-term is the massive harm to the lives of people right now if governments around the world were to take all of the steps taken that are, cumulatively, big enough.

  • Rhett Hardwick

    Not frequently, but occasionally, I find myself wondering what kind of people are attracted to appointive government positions. They must have some desire to control things. It isn’t the money. Clinton was unable to fill 3500 appointive positions. It has been pointed out to me that road planning is the ultimate “social engineering”, in he sense that it determines what areas are to be populated, and which are not.I am not the first to notice that highways in Florida frequently come to an abrupt end, and guess who owns the land where they end.

  • Honesty Broker

    Culture does resolve these issues – they do it through an elected government that is (ideally) not corrupted by wealth and industry that lobby government officials. That used to be how our government worked but we are corrupt now.