Beware the “fixers”, the tinkerers, the fiddlers when it comes to the economy:
But the whole idea of fixing, running, regulating, designing, or modeling an economy rests on the notion that, if the right smart guys are at the rheostats, the economy can be ordered by intelligent design. But the economy is no mechanism. There is no mission control. Government cannot swoop down like a deus ex machina to explain the inexplicable and fix the unfixable. Why? Because the knowledge required to grasp each of the billions of actions, transactions and interconnections would fry the neural circuitry of a thousand Ben Bernankes. This is what F. A. Hayek called the knowledge problem. Knowledge, Hayek reminded us, is not concentrated among a few central authorities but is dispersed around society. That’s why bad unintended consequences follow government interventions like black swans.
A few economists have not succumbed to the “fix it” fixation. They know that society is not like a machine at all, but an ecosystem. Faster than you can say market fundamentalism, a Keynesian will scoff at this metaphor. But his favorite trope has helped to stagnate many an economy; making Rube Goldberg apparatuses out of means-ends networks, perversion out of productivity. As Czech President Vaclav Klaus wisely notes: “The market is indivisible; it cannot be an instrument at the hands of central planners.”
I’ve had more than one patient come to my office and say,”Fix me.” Oh, that it were so easy. I’d love for sick patients to have a reset button. I’d love for one adjustment to fix the whole system. Just as I bet every oncologist would love for every surgery to guarantee that the patient is “cured”. Bodies are more complex than that. So is the economy.
The economy, like a body, is a moving, breathing, changing organism responding to stresses in the environment. Many factors determine whether a body heals or dies and no doctor can magically create outcomes. A doctor can, of course, accelerate the process one way or another. But sometimes, even the best care won’t help a patient. Bad care can kill a healthy person, though. There are lots of ways to do harm to a person. That’s why the first rule of medicine is to do no harm.
Barack Obama’s advisers seem to think that the economy is some sort of car that just needs a tune-up or even a new engine and it will be all better. It’s not. Just as one man didn’t create the United States economy. One man, or ten, will not heal today’s economy. The American economy is it’s own life, with it’s own will. Too much meddling will make it sicker, not better. And the patient (all of us) have to want to get better, too. The government would do well to encourage the individuals who make up the economic body to make healthy choices. only then will the economy heal. Still, individuals make the choices.
Today, those working at the frontiers of complexity science are beginning to apply Darwin’s insights to the social sciences, too. “[Economics in light of complexity] is based on the emergent behavior of systems rather than on the reductive study of them,” writes theorist Stuart Kaufmann. “It defies conventional mathematical treatments because it is not prestatable and is nonalgorithmic. Not surprisingly, most economists have so far resisted these ideas. Yet there can be little doubt that learning to apply these lessons from biology to technology will usher in a remarkable era of innovation and growth.” (Lest cries of ‘social darwinism’ go up, remember that we’re only talking about the functional aspects of an economic order, not whether a safety net is justified.)
There may come a point where biology can be reduced mathematically. I don’t know. Perhaps then, the economy will be able to be so reduced, too. Until that magic formula is found, policy makers need to stop acting like their non-stop interventions are making the difference. Forget spoiling the soup, they risk killing the patient.
Cross-posted at RightWingNews