Reality Check for the Central Planners: Hayek’s Nobel Speech “The Pretense of Knowledge”
The central planners are scrambling to hedge their once braggadocious claims that their massive intervention into the free market economy would bring about renewed prosperity and fuller employment. Meanwhile President Obama is revisioning history as one where it has been generally acknowledged the private sector is the main engine of economic and job growth, but even more government intervention is needed to ease the disruption and move America forward.
The problem with this phony narrative is that the only “sector” of the economy that has grown of late is the government. And the strongest sector of the economy before the Obama presidency, healthcare, has been seized, causing even more uncertainty as to what the central planners will confiscate next.
What men like Obama lack in results they more than make up for in hubris. Confident that the allied media will rehash their ready-made memes without critical opposition, either in the media or by the so-called opposition party, the most brazen bromides and warped narratives can be dispensed, only to be lapped up by the hoof-clapping sheeple.
A dose of reality is needed to counter-balance the arrogance of today’s micro-managing economists, who simply cannot leave the economy alone. It is not only counter-intuitive but profane to allow people to adjust their behavior in response to economic stress, and thus for the market to rebalance. The economy’s influence upon not only the public, but upon the careers of the central planners themselves is sacrosanct.
An excerpt from the full text of F.A. Hayek’s Nobel laureate speech will demonstrate both a humble and learned approach to the subject of economics, a field that has been utterly debauched by Keynesianism in recent decades. It has gone from a social science where one studies the effects of economic phenomena, to one where central planners attempt to direct the phenomena and determine the outcomes. The result, unsurprisingly, is a perpetual state of disorder and uncertainty.
From Hayek’s “The Pretense of Knowledge”:
In fact, in the case discussed, the very measures which the dominant “macroeconomic” theory has recommended as a remedy for unemployment — namely, the increase of aggregate demand — have become a cause of a very extensive misallocation of resources which is likely to make later large-scale unemployment inevitable. The continuous injection of additional amounts of money at points of the economic system where it creates a temporary demand which must cease when the increase of the quantity of money stops or slows down, together with the expectation of a continuing rise of prices, draws labor and other resources into employments which can last only so long as the increase of the quantity of money continues at the same rate — or perhaps even only so long as it continues to accelerate at a given rate. What this policy has produced is not so much a level of employment that could not have been brought about in other ways, as a distribution of employment which cannot be indefinitely maintained and which after some time can be maintained only by a rate of inflation which would rapidly lead to a disorganization of all economic activity. The fact is that by a mistaken theoretical view we have been led into a precarious position in which we cannot prevent substantial unemployment from reappearing; not because, as this view is sometimes misrepresented, this unemployment is deliberately brought about as a means to combat inflation, but because it is now bound to occur as a deeply regrettable but inescapable consequence of the mistaken policies of the past as soon as inflation ceases to accelerate. […]
Yet the danger of which I want to warn is precisely the belief that in order to have a claim to be accepted as scientific it is necessary to achieve more. This way lies charlatanism and worse. To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm. In the physical sciences there may be little objection to trying to do the impossible; one might even feel that one ought not to discourage the overconfident because their experiments may after all produce some new insights. But in the social field, the erroneous belief that the exercise of some power would have beneficial consequences is likely to lead to a new power to coerce other men being conferred on some authority. Even if such power is not in itself bad, its exercise is likely to impede the functioning of those spontaneous-ordering forces by which, without understanding them, man is in fact so largely assisted in the pursuit of his aims. We are only beginning to understand on how subtle a communication system the functioning of an advanced industrial society is based — a communications system which we call the market and which turns out to be a more efficient mechanism for digesting dispersed information than any that man has deliberately designed.
Not the easiest read, but well worth taking in on a conceptual and philosophical level.