This is but a minor post, to muse on something said explicitly at Cafe Hayek (I write it that way to put off all the H-haters) as almost an aside. The main point is worth saying again; the text is from Dawkins: if you start with a complicated working mechanism... there are many more ways of making it worse than of making it better. Obvious but easily missed; and very obvious when you see wazzocks like Trump or Maduro flailing around desperately trying to change things; by now we're into their phase n, where they're trying to patch up the results of phase n - 1, which was them trying to patch up the multi-order consequences of their previous actions.
Anyway, onto what DB wants to say, which is
there are many more ways of making the economy worse than there are of making it better. Therefore, the wise course is to devolve decision-making down to as low as level as possible. Let each person survey his or her immediate economic surroundings and, using his or her unique knowledge and perspective, adjust. If that person adjusts in a mistaken way, the harm will be localized and he or she has a powerful incentive to get it right on subsequent tries. Private property and contract rights encourage this localized decision-making. But state intervention is not localized; it’s systemic and large-scale. The chances that the state will get it right are slim; the unintended, unseen ill-consequences of such intervention are always almost certain to swamp whatever benefits such intervention brings.I largely agree, but (and I thought of commenting there, but I know it won't work, so didn't bother) the idea that everything should devolve down seems wrong, by analogy to solving fluid dynamics equations. The kind of thing I'm thinking of is stuff like multigrid, terribly popular when I was doing my doctorate. If you just solve problems locally, global convergence is very slow, and gets worse as your local grid becomes finer. I'm not sure how good an analogy that is, though, because that's about the flow of information, and nowadays information flows very well, to anyone interested. One could think about the flow of rules, perhaps. There's no absolute boundary, but I'd travel in the direction that DB suggests, from where we are today.
Refs
* My exciting response to mt's anti-driverless-car urtext on Medium, which I don't much like.
* Venezuela’s tragedy shows the folly of messing with markets.
"the idea that everything should devolve down seems wrong, by analogy to solving fluid dynamics equations."
ReplyDeleteEconomics has multiple equilibrium states. Like fluids.
https://en.wikipedia.org/wiki/Fluidics
That depends on your fluids. Many fluid situations with given boundary conditions have one stable equilibrium. Others, like the atmosphere, have no equilibria.
ReplyDeleteWhat are the boundary conditions of economics?
ReplyDeleteMight different boundary conditions have different equilibrium behaviors?
DBx, not DB. Anyway, I prefer DBB.
ReplyDeleteThe actual question is never really "should the economy be manipulated." It's "for whose benefit should it be manipulated. The answer has almost always been "for the benefit of this or that elite." The first contrary example I'm aware of was the Babylonian King who instituted the Jubilee year, not because he was necessarily such a softee, but because the observed alternative was disintegration of the state.
ReplyDeleteThe State can get it right, and big time. Didn't the Marshall Plan prove that? The problem that needs fixing is how to get the right people making the decisions at the top.
ReplyDeleteDBx: ah yes I was forgetting. Donald J. Boudreaux, to be clear.
ReplyDelete> for whose benefit should it be manipulated
I disagree. But you're sort-of getting closer: the govt intervention that you so fervently desire is often for cronies. I'm still hopeful that eventually you'll see that the answer is less intervention and therefore less cronyism, rather than chasing the chimera of "good intervention".
> how to get the right people making the decisions at the top
Platonism: if only we were ruled by philosopher kings all would be well. Much loved by philosophers. I prefer Popper's version: we want a society that will survive the wrong people being in charge, not one that only works if the right people are in charge.
> Marshall Plan prove that?
Probably; I don't have a reason to disagree. Although it was of course merely a palliative on top of earlier state foul-ups.
"A society that will survive the wrong people being in charge"
ReplyDeleteSo how does that work, anyway?
In a world with nasty states, some armed with nuclear weapons, the people in charge in "Popper's State" need the creditable ability to respond with sufficient force. Yet that raises the possibility that the wrong person or people might make a very wrong decision, leading to improper use of that force ending with the destruction of "Popper's State" and the death of the vast majority of the inhabitants. Or if this process is made too hard to operate, and too many people need to agree to respond before any orders are accepted, then it might not provide a sufficiently creditable deterrent to some nasty nasty state. Again ending with the destruction of "Popper's State" and the death of the vast majority of the inhabitants. There can be no process, at least that I can see, than can overcome sufficient stupidity and avoid the horrible consequences of wrong decisions.
As for Philosopher Kings or Presidents, counter example is Donald Trump. So that doesn't work as well.
It would be so simple if I just had an ideology.