Brad DeLong has an article up at Project Syndicate noting and celebrating "intelligent design" in the economy. He also spends time on why things are not always designed well - which is important. He goes through the long history of economic design in this country, and finally he talks about the current debate - specifically cautioning against the idea of "competitiveness" as an inappropriately zero-sum outlook.
I would add a few things:
1. We should not restrict early design to the Federalists, as DeLong has done. The designs associated with western expansion (which eventually reached fruition in the the railroads and land grants that DeLong does mention) grew out of a distinctly Jeffersonian take on design. Jefferson was not opposed to manufacturing or commerce - what he was opposed to was an impoverishing version of manufacturing and commerce, which he sought to remedy with western expansion. This was a complaint Jefferson registered against George III in 1776, and with Hamilton throughout the 1790s, and it was a concern he acted on when in office and advocated after leaving office.
2. We should not confuse all design with central planning. This conflation has been very problematic for a lot of Hayekians especially.
3. In the same vein, we should not think that designed systems do not have evolutionary tendencies. Designed systems perpetuate themselves with some likelihood of (1.) ending, or (2.) changing. That is a recipe for evolution, or as some people like to put it - spontaneous order. Again, many Hayekians end up conflating two very different issues: undirected Darwinian evolution and directed social evolution. When Spencer mixed Darwin with society uncritically it did not turn out well, and it does not turn out well for a lot of modern proponents of spontaneous order either. Change in society is not driven by genetic variation, it is driven by conscious decisions and designs. Sometimes these are designs executed in a market, sometimes they are not. When designs are executed in the market there are certain informational advantages - and as we know, informational fidelity is extremely important to evolution. But the conditions for the informational advantages of markets don't always exist, so social evolution or spontaneous order simply can't be considered as always being market order.
I am guessing the Hayekian community will have a field day with this. I am guessing I will be frustrated with much of the commentary because they'll just assume that DeLong is somehow repudiating the idea of spontaneous order.
Friday, January 28, 2011
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I know that the slippery slope argument is the weakest argument one can use, but it is borne out by reality.
ReplyDeleteDesign and central planning may be different in intentions, but not results. A price control starts out with a control of the prices of one good. The price merely reflects a lack of availability, and the cut in price does not remove that lack of availability. And the said good runs out. So a price control is put on the raw materials used to produce the good. The same problem persists. It comes to a point where the only factor price still left uncontrolled is the worker's wages. So now we have wage controls or maximum wage laws. Now a labour shortage. Still doesn't solve the problem. Must get capital. Let's get priority sector lending laws. Oh no, money is being wasted. Nationalise those incompetent banks and waste more money! Controlled businesses not doing as they are supposed to! Nationalise them too! Or bring them under complete departmental control, with a nominally private entrepreneur.
The above situation describes the rabid chaos that was the British economy after WW2, and there was indeed a labour shortage under Attlee. Poor fool thought there was an unemployment problem, because of workers coming out of the workforce with wage controls, and started implmenting anti-unemployment policies. It's the same situation for price controlled 1950s United States, where timber was accumulating in warehouses where it was not needed and running out in areas where it was needed. Such wasteful surpluses and dire shortages were more typical of another economy -the Soviet Union, only to a greater extent.
Most of all, Nazi Germany could keep applying price controls to an extent until prices, wages, and interest rates were purely nominal figures in an economy totally directed from Berlin.
By the way - deLong advocated nationalisation of banks recently in his blog. Not the same kind of nationalisation, but a temporary reconstructive one (although re-privatizing can take many difficult years), but it will likely result in the same spiral of problems over and over and over. His commenters tried to bring him to reality and told him, "We have to work with this world. Not where your ideas will be accepted fully or work exactly as you hope." There will always be the law of unintended consequences, and where inevitable failure results, failures can be denied.