“It will be different this time.” Not!
January 2, 2013 5 Comments
Keynesian policy proposals, if one takes the time to notice, are basically the same central planning solutions over and over again, no offense to Keynesians. However, for those that live their lives by “talking points,” the standard Keynesian talking point is: “…it will be different this time.” The implicit/explicit assumption is: the previous plan failed not due to the plan itself, rather due to those people implementing the plan. The implicit/explicit assumption alludes to: with a new set of people, experts as they were, implementing the plan, this additional time, the plan will end in triumphant success.
Yet the plan fails like last time, which becomes this time, and the next time. Thinking more critically about the “talking point,” it is very related to the concept: you can’t make mistakes if it’s everybody else’s fault.
One might consider F.A Hayek’s essay The Use of Knowledge in Society. Note this quotation:
“….as far as scientific knowledge is concerned, a body of suitably chosen experts may be in the best position to command all the best knowledge available—though this is of course merely shifting the difficulty to the problem of selecting the experts.” (1)
Hayek is pointing out that the central planners–those brilliant people with foolproof plans, those people that should really be running your life, as they know best–can’t possibly know the time and circumstance of every last decision. Gazillions of decisions are made every day and shall be until the end of time – by none other than YOU. Oops! Hence it’s not the ability of the “experts,” it’s the impossibility of the experts.
Returning to Keynesian policy proposals and the talking point “…it will be different this time,” one can rule out that the plan failed due to the people implementing the plan, as they are destined to fail. Not a chance in hell any group of experts could ever possibly know the time and circumstance of every last decision, now, one second from now, and into infinity. That leaves one with the plan as the failure. Go figure.
Speaking of Keynesianism:
“For policy, the central fact is that Keynesian policy recommendations have no sounder basis, in a scientific sense, than recommendations of non-Keynesian economists or, for that matter, non-economists.” – Robert E. Lucas and Thomas J. Sargent (2)
So it’s all John Maynard Keynes’s fault! Nay, nay! Keynes magnum opus, The General Theory of Employment, Interest and Money, at the end of the day and upon a ton of empirical examination, is merely one man’s view. However, within Keynes’ theory comes the “levers of the economy.”
“Keynes was exceedingly effective in persuading a broad group—economists, policymakers, government officials, and interested citizens—of the two concepts implicit in his letter to Hayek: first, the public interest concept of government; second, the benevolent dictatorship concept that all will be well if only good men are in power. Clearly, Keynes’ agreement with “virtually the whole” of the Road to Serfdom did not extend to the chapter titled “Why the Worst Get on Top.”
Keynes believed that economists (and others) could best contribute to the improvement of society by investigating how to manipulate the levers actually or potentially under control of the political authorities so as to achieve desirable ends, and then persuading benevolent civil servants and elected officials to follow their advice. The role of voters is to elect persons with the right moral values to office and then let them run the country. – Milton Friedman (3)
Not so fast my friend:
“There is some justification at least in the taunt that many of the pretending defenders of “free enterprise” are in fact defenders of privileges and advocates of government activity in their favor rather than opponents of all privileges. In principle the industrial protectionism and government-supported cartels and agricultural policies of the conservative groups are not different from the proposals for a more far-reaching direction of economic life sponsored by the socialists.” - F.A. Hayek (4)
Not so fast my friend, part deux:
“The fundamental principle of socialism is that it is appropriate to use force to organize society, to take from some and give to others. The government has nothing to give. The government is simply a mechanism which has the power to take from some to give to others. It is a way in which some people can spend other peoples’ money for the benefit of a third party – and not so incidentally, themselves”. – Milton Friedman (5)
“The institutions and habits of nonmarket control have always been present at the state and local government levels, where they are often flexible, amenable, friendly, and congenial. In raising those powers to the federal level, however, we have created a monster, and we have not found a way to reform it or even to control it.” – Deirdre McCloskey (6)
Hence we end with Keynesians, neo-Keynesians and new-Keynesians very much supported by many politicos and central planning advocates. Why the support? The supposed Keynesian support is not so much based upon the theory that Keynes put forth in his magnus opus, Theory of Employment, Interest and Money, rather the support focuses on Keynes green light signal of: “levers of the economy.” Much associated with the levers of the economy is Milton Friedman’s fourth category of spending: other people (politicos) spending other people’s money (taxpayers) on other people (recipient class). Politicos can put their hands on the levers of the economy to create political constituency-building exercises with other people’s money. Central planning advocates can put their hands on the levers of the economy, and of course, other people’s money, to create an expertly laid out dystopia.
Maybe the old adage of “money is the root of all evil” was mistaken; the corrected version being: “other people’s money is the root of all evil.”
(1) The Use of Knowledge In Society, F.A. Hayek
(2) After Keynesian Macroeconomics, aka After the Phillips Curve, Robert E. Lucas and Thomas J. Sargent, 1978, page 57
(3) Milton Friedman, Richmond Federal Reserve Economic Quarterly, volume 83/2 Spring 1997.
(4) F.A. Hayek, page 107 of Hayek’s 1948 collection, Individualism and Economic Order
(5) The Invisible Hand in Economics and Politics, Milton Friedman, Institute of Southeast Asian Studies, 1981, p11.
(6) Pg. 118 of Deirdre McCloskey’s, Second Thoughts: Myths and Morals of U.S. Economic History
Bill Heasley, a local economist, writes an occasional column for the Guardian.