Paul Krugman (Nobel Prize in Economics recipient, Princeton professor and Keynesian guru of the New York Times Editorial page) recently opined, “In a better world — specifically, a world with a better policy elite — a good jobs report would be a cause for alloyed celebration.”
Now, I have numerous quibbles with Krugman, namely his perennial calls for an even larger “stimulus,” lack of regard for inflation and federal debt and a propensity to conduct himself as more of a Democratic Party trumpeteer than objective economist. In this case, I’d like to highlight Krugman mourning our lack of a “better policy elite.” According to this Brain Trust worldview, if only we had the “right” people in power — whether they be tenured Ivy Leaguers, math wizards or benevolent dictators — we’d be chugging along the road to prosperity. Hubris aside, this model is impossible. No one person — or army of Tim Geithners — no matter how smart or saintly, can possibly possess the specific, local insights necessary to pull the strings of our tangled, spider-webbed economy aright.
This, alas, is what Friedrich Hayek meant when he spoke of the “Knowledge Problem.” Remarkably, the Austrian critique of central planning schemes, put forth by Ludwig von Mises and Hayek back in the 1920s and ’30s, did not rest on moral grounds. Instead, these economic outcasts argued that socialism, and the top-down Keynesian schemes Europe found so seductive, simply cannot account for price mechanisms. Prices obviously fluctuate all the time, yet central-planners assume a fixed answer, based on a worker’s labor and the product’s presumed value.
However, prices, as is evident when I spend a disproportionate amount of my income on argyle socks, are tied up in how much value people associate with a good and a service, and further, how much they are willing to spend. Isolated, Politburo-styled number-crunchers cannot possibly know why or how people will value what they do (e.g. Lady Gaga, Che Guevera T-shirts, lattés), so a socialist’s attempt at forecasting prices is, according to my Austrian friends, impossible. And without any prices as a guide, the State has no idea what to produce and how much. Shortages ensue pretty quickly. What’s more, the fact that the USSR was able to estimate prices as long as it did is because it looked Westward. In other words, the Soviets relied on the natural price system of capitalism to prop up their factories. Socialism and economic-meddling in general involve the “fatal conceit” that the Intelligentsia knows what’s best. But the beauty of capitalism is that no one, on his own, has any clue. No Oz sits behind the curtain; economic factors spontaneously coordinate.
When Hayek first penned “Intellectuals and Socialism,” I suspect he had bookish, well-meaning college students in mind. No matter how many years pass, no matter how many USSRs or North Koreas or Venezuelas thuggishly repress the pocketbooks and political liberties of their citizens, academics long to puppeteer economies from the top-down. A humanitarian zeal, combined with too many hours in the library, seemingly morphs many good-natured university faculty and students into socialist-sympathizers. I worry that too many in the collegiate crowd wear their collectivist attitude as a badge of compassion.
Presently, the Washington policy powers-that-be feel a bit like they’ve been placed on a hamster wheel. Despite their best efforts, federal economic boosts, education spending, housing subsidies and green jobs schemes simply haven’t worked. Rick Santorum and Barack Obama alike must stop proposing faulty mechanisms for reviving the manufacturing industries and implementing the type of society people on the Washington payroll prefer. I, for one, am not all that nostalgic for the New Deal era. As Walter Russell Mead articulates in his article “The Once and Future Liberalism,” the “blue social model” that guaranteed solid, pension-guaranteeing blue-collar jobs for high school grads are a thing of the past. It’s time to stop fantasizing that wise bureaucrats can recreate the 1930s, ’50s or even Reagan-era ’80s. Much of the blue decline rests on insolvent entitlement programs which the government prophesied it could fund into all perpetuity. It can’t.
This doesn’t necessitate fatalism, so much as a trust in things unseen. That doesn’t mean praying to Adam Smith’s “invisible hand,” but it does mean envisioning our own, entrepreneurial instincts and talents. This is a difficult task. Our alternative is thrusting our hopes on some redeeming politician and his circle of advisers, who, we must remember, are always shorter, less attractive, and more prone to stumble than it seems on the nightly news.
Danielle is a sophomore. You can reach her at email@example.com.