Then a miracle happens… | AIER

There is a popular single-frame cartoon by Sydney Harris many years ago that captures the error – what is largely unscientific – in modern economics too often. In the cartoon, two professors stand next to each other in front of a blackboard filled with complex mathematics. The senior professor points to one part of the detailed line of reasoning on the board and advises his younger colleague, “I think you should be more specific here in step two.”

The second step, scattered and simple in the middle of complex math on both sides, says, “Then a miracle happens…”

This cartoon is undoubtedly funny. It also remarkably reveals the not-so-funny fact that much of modern economics is like the elaborate thought chain shown on the cartoon board. When doing economic policy analysis, economists assume that miracles occur regularly.

The main miracle posited by modern, unscientific economists who recommend government intervention is that government officials will act apolitical, and not only do so without any of the human flaws, myopia and psychological quirks that (presumably) give rise to market imperfections that allegedly justify government intervention, But it also operates with more information and wisdom than is discovered and used in the markets.

All the detailed reasoning which led to this miracle, and all that is used to describe the things which followed this miracle, may be a flawless product of unquestionable intelligence. But this brilliance does not justify the resourceful step of assuming a miracle, nor does it make the results of such an endoscopy correct. It is wholly unscientific for economists (or for anyone, for that matter) to suppose that government will perform miracles.

But that’s exactly what they assume.

Industrial policy advocates are among the major culprits. Apparently without exception, these advocates assume that the government officials charged with carrying out industrial policy, when they take office, are miraculously transformed into apolitical angels who have access to all the detailed knowledge that must be known to them to replace the market allocation of resources. .

Other officials who are supposed to work miracles are politicians with the power to enforce minimum wages. Economists, always smart and remembering their college studies in labor economics, remember that it is possible to draw a beautiful picture on the board revealing the conditions under which a minimum wage raises the wages of low-skilled workers without pushing any of them into the ranks of the unemployed. Spoken miracles! Actual politicians who impose minimum wages somehow discover these conditions in reality and, without thinking of any political advantage for themselves, impose a scientifically and precisely calibrated minimum wage for these theoretical conditions.

Miracles are also performed by bureaucrats in agencies such as the Food and Drug Administration and the Federal Reserve. These officials are never concerned with the size of their budgets or their future business prospects, they are always and only concerned with improving the welfare of their fellow citizens. To perform their duties as advertised, FDA scientists need to know the different risk preferences of hundreds of millions of Americans in order to determine sufficiently “safe and effective” pharmaceuticals and medical devices. How do they come to possess such knowledge? Why, by some miracle!

Fed experts, to perform their duties as advertised, must have knowledge of just how and when to manipulate the money supply so that maximum economic growth is fueled. While many of these scholars insist that while the “optimal” supplies for the likes of machine tools, mangoes, steels, and daggers can only be Discover Through the process of a competitive market, the “optimal” amount of money has to be determined by them while they are in an imposing office building. This divination is a miracle!

It is also assumed that miracles happen when economists advise governments on how to protect the environment. The same intelligent economist who is fascinated by graphs showing minimum wages is himself fascinated by the potential of carbon taxes to reduce carbon emissions. This economist is really right that higher taxes on carbon emissions lead to lower carbon emissions. This score is ECON 101 material; It does not require a miracle. The miracle happens when the economist concludes that government officials can know in practice, with enough certainty, that carbon emissions ‘must’ be reduced. And the with you. (Another smaller miracle is supposed to happen when the economist predicts the exact impact on carbon emissions of proposed higher taxes on such emissions. But I’ll ignore that small miracle here.)

For the government to intervene to reduce carbon emissions, the government must intervene to reduce economic activities that either depend on carbon-based fuels or that produce carbon emissions as a by-product (or both). While one does not need to possess God-like powers to understand that inexpensive cuts in carbon emissions would be a blessing, because cuts in carbon emissions are a certainty. Not No cost, one Do God-like knowledge is needed to see if any proposed government cuts will yield, in the real world, benefits greater than those costs.

Economists and ecologists can speculate until cows stop thinking about the benefits of lowering carbon emissions, and how those benefits stack up against costs. But the unfathomable complexity of the modern economy combines with the extensive use of carbon fuels to make all of these speculations a little better than voodoo. We can all agree that if an omniscient, omnipotent, omnipresent God appeared on the scene and offered his services to improve environmental policy, we would be crazy to refuse this offer of help. God after all Can Work miracles!

But we are just as insane to swallow so much intrusive advice from economists as flesh and blood. Only these people Think They are miracle workers. And so their advice often, if inadvertently, only reinforces Satan’s schemes.

Donald J. Boudreau

Donald J. Boudreau

Donald J. Boudreaux is a Senior Fellow at the American Institute for Economic Research and with the F.A. Hayek Program for Advanced Studies in Philosophy, Politics, and Economics at George Mason University’s Mercatos Center. Member of the Board of Directors of the Mercatos Center; He is professor of economics and former chair of the economics department at George Mason University. He is the author of books Basic Hayek, GlobalizationAnd the Hypocrites and half-intelligenceHis articles appear in publications such as The Wall Street Journal, The New York TimesAnd the US News & World Report In addition to many scientific journals. He writes a blog on behalf of Cafe Hayek and a regular column on economics for Pittsburgh Tribune review. Boudreaux holds a doctorate in economics from Auburn University and a law degree from the University of Virginia.

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