Experts and the Economy

In “Socialist Calculation and the Turing Test,” I wrote about the

suggestion … that one can emulate the outcomes that would be produced by competitive markets — if not something “better” — by writing rules that, if followed, would mimic the behavior of competitive markets.The problem with that suggestion … is that someone outside the system must make the rules to be followed by those inside the system.

And that’s precisely where socialist planning and regulation always fail. At some point not very far down the road, the rules will not yield the outcomes that spontaneous behavior would yield. Why? Because better rules cannot emerge spontaneously from rule-driven behavior….

Where, for instance, is there room in the socialist or regulatory calculus for a rule that allows for unregulated monopoly? Yet such an “undesirable” phenomenon can yield desirable results by creating “exorbitant” profits that invite competition (sometimes from substitutes) and entice innovation. (By “unregulated” I don’t mean that a monopoly should be immune from laws against force and fraud, which must apply to all economic actors.)

I suppose exogenous rules are all right if you want economic outcomes that accord with those rules. But such rules aren’t all right if you want economic outcomes that actually reflect the wants of consumers….

Of course, the whole point of socialist planning is to produce outcomes that are desired by planners. Those desires reflect planners’ preferences, as influenced by their perceptions of the outcomes desired by certain subsets of the populace. The immediate result may be to make some of those subsets happier, but at a great cost to everyone else and, in the end, to the favored subsets as well. A hampered economy produces less for everyone.

Socialism — a.k.a. “liberalism” — is all about reliance on experts. As Don Boudreaux says,

modern “liberalism’s” ideas are about replacing an unimaginably large multitude of diverse and competing ideas – each one individually chosen, practiced, assessed, and modified in light of what F.A. Hayek called “the particular circumstances of time and place” – with a relatively paltry set of ‘Big Ideas’ that are politically selected, centrally imposed, and enforced not by the natural give, take, and compromise of the everyday interactions of millions of people but, rather, by guns wielded by those whose overriding ‘idea’ is among the most simple-minded and antediluvian notions in history, namely, that those with the power of the sword are anointed to lord it over the rest of us.

Megan McArdle puts it this way:

So we get [from central planning] what most interests wordsmiths:  a succession of enormous plans (health care exchanges! privatize social security!), most of which fail….
But all this makes me very skeptical of handing elites more power, particularly when they are given that power in order to reduce the autonomy of some other group.  (And somehow, that usually is what it’s for–you haven’t seen much lobbying for better regulation of university professor quality, even though a bad idea is probably more dangerous than a bad apple.)
J.M. Keynes — the experts’ expert — said that “Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.” Keynes is the quintessential defunct economist, and mindless politicians (among others) are his slaves.