Wednesday, July 8, 2015

Hubris-fueled interventions

From Quotation of the Day… by Don Boudreaux. Boudreaux quotes Hayek:
Not because he knows so much, but because he knows how much he would have to know in order to interfere successfully, and because he knows that he will never know all the relevant circumstances, it would seem that the economist should refrain from recommending isolated acts of interference even in conditions in which the theory tells him that they may sometimes be beneficial.
Boudreaux then comments.
In order to intervene successfully in markets would require not only the kind of abstract knowledge that the best economists learn by mastering their discipline but also knowledge of what Hayek elsewhere famously called “knowledge of the particular circumstances of time and place.” The very nature of this latter knowledge is that it cannot possibly be known to a single mind or agency. Statistics, for all their value in many contexts, are not – contrary to the mistaken supposition of many people – adequate substitutes for the “knowledge of the particular circumstances of time and place.” Indeed, the very best economists understand that perhaps the principal lesson to be drawn from the abstract knowledge that they master is that the competitive market order is so complex that it is folly to imagine that conscious interventions into it will generally succeed in improving the economic well-being of ordinary people.
I take this to be a useful observation in a different epistemological equation, that of the value and limitations of stereotypes (which are crude averages where they have any sort of connection to reality). A stereotype is useful in the absence of any other information but “knowledge of the particular circumstances of time and place” is always superior to a theoretical abstract.

Boudreaux then also observes,
Such a stance in support of non-intervention is unfashionable. Confessing honestly one’s unavoidable ignorance of what must in reality be known to intervene successfully does not get one many gigs on television and other media venues where various “solutions” are paraded about. A path to popularity isn’t paved by consistently noting humbly that one cannot predict any details of the future but can say only that whatever is likely to emerge over time from the competition of consumers and producers each spending his and her, and only his and her, own money will likely be better than the results of this Senator’s plan, of that president’s program, or of those economists’ proposed interventions.

In short, steadfastly taking stands based upon the mature understanding that reality is both far more complex than most policy wonks, politicians, and media types think and that reality is not optional is not as fashionable as is feeding the popular delusion that smart, well-advised, and well-spoken people in government can reliably and consistently improve reality through their conscious, hubris-fueled interventions.

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