In his acceptance speech for the Nobel Prize in Economics, Friedrich Hayek articulated the idea of the pretense of knowledge. He recognized that even if politicians and economists were angels with the best intentions, they would still be incapable of bringing about desired positive results for the economy and the nation.
No president, economist, or congressman, can accurately predict the future. Even weather forecasters can only generalize the weather patterns for the next day or two, and even that is constantly changing. They cannot tell us for sure what the localized weather will be. Thus even weather forecasts are merely educated guesses which turn out to be wrong a significant portion of the time. The future is always unknowable. There are significant events the effects of which can be deduced by cause-effect logic, such as overcast skies downwind of a volcanic eruption or the bursting of an economic bubble caused by artificial inflationary credit expansion by monetary authorities, but it is impossible to precisely predict geologic activity or the preferences of consumers and investors.
Most of the knowledge that exists in a society is local, the understanding of particular processes, markets, and local economies and events, such as how to how to cook the best tasting roast beef, what terms to use for your customer base, where to buy the cheapest gallon of milk, or at which hot-spot the cool people hang out. Much of the relevant knowledge is tacit, that which can't be easily documented, such as an old timer's experience. Generalized knowledge can be taught in schools. The laws of physics always hold true and can be used to achieve particular goals. The decision-making process of individuals, however, depends not only on their understanding of the way the world works, but also on their own goals and their assumptions about the future, about other people, about the political process, about the peculiarities of their neighborhoods and workplaces, and a million other pieces of information that no politician or economist can possibly know.
There is no national or global economy. There are only local economies. There are statistical artifacts collected for the purpose of influencing national or global policy, but in order for those policies to be implemented on a wide scale, local economies must be ignored and the decision-making process for millions of individuals must be thwarted or distorted. Policies intended to reduce national unemployment fail to recognize that unemployment is not a problem everywhere, and in those areas where it is, its causes are widely varied. A one-size-fits-all solution may help some, but it comes at the expense of hurting others. Western New York did not have a tremendous housing boom, and thus, it did not have a tremendous bust like many large metropolitan areas. National policy, however, takes from Western New Yorkers to pay for losses for which they weren't responsible, on gains from which they did not benefit.
National policy-makers have been very busy acting like they are the saviors of the American people and the economy. They have been trying stimulus after stimulus, program after program, and inflicting failure after failure on the American people. The current president has spoken of his high regard for Franklin D. Roosevelt, the one who presided over America's longest and worst depression. Roosevelt and the politicians and advisors of his time also had the savior mentality and harbored the pretense that they knew how to solve the problems of the country and the world. They tried stimulus after stimulus, program after program and inflicted failure after failure on the American people.
The Roosevelt administration, like Obama's, was antagonistic toward business, lusted after higher taxes, and tried to regulate the economic activity of the citizens. Our politicians and monetary authorities are shooting in the dark, pretending that they know just what the doctor ordered to cure the ill economy. Unfortunately the doctors are quacks. The constant jerking of the economic strings has made investors, businesses, and even consumers gun-shy, taking a wait-and-see approach, fearing what economist Robert Higgs calls "regime uncertainty."
It is time for our politicians to fess-up that they don't have a clue about what to do, and that they are making things worse. They need to quit the business of running the economy and our lives. They need to quit choosing winners and losers and free the people to reap their own benefits and to suffer their own consequences. That is, of course, unless they want a repeat of FDR's lost decade.
Dan McLaughlin is a columnist for The Post-Journal. Contact him at danmcl999@roadrunner.com.