The Corner

Economy & Business

Right-Wing Central Planning Is as Foolish as Left-Wing Central Planning.

In response to Thanks

The fatal conceit is never going away. Arguing in favor of “economic nationalism” in National Review, Darren J. Beattie writes:

A comprehensive cost-benefit analysis of economic-nationalist policies on trade and immigration, however, would take into account not only the higher prices consumers might face as a result of tariffs or immigration restrictions but also the higher unemployment and lower wages that would result from the absence of a given protectionist policy.

Such analysis would examine both the concentrated burden on those directly put out of work and the dispersed burden on taxpayers from the associated social and economic consequences of higher unemployment. A sober, undogmatic assessment along these lines would provide a more accurate picture of the winners and losers of various protectionist policies from the perspective of corporations, taxpayers, consumers, and workers in the affected industries.

That all sounds very sensible except for the fact that the kind of analysis Beattie suggests is impossible to conduct with any meaningful degree of precision.

It is the old familiar dream of the central planner, an orrery economic universe in which things move in predictable and comprehensible patterns. That model of the economy has no relationship to reality. A million different things might become of any given laid-off steelworker; predicting what would happen to an entire industry’s work force (or even a small portion of it) in the absence of a certain protectionist policy is not economics — it is speculative fiction. For the most part, we do not have a very good record for predicting the effects of policies; trying to build a set of policies on an intellectual framework consisting of imagined counterfactuals will fail for the same reason that wage and price controls fail, agricultural-market management fails, and those highly targeted “investments” every president proposes in every State of the Union address fail: Human civilization is not an ant farm that can be viewed in cross-section and comprehended in total.

The real world is populated by politicians and lobbyists rather than philosopher-kings, but a government of philosopher-kings that tried to micromanage the economy in the way Beattie suggests would fail, just as all similar attempts at putting the economy under political discipline have failed. Right-wing central planning is as foolish as left-wing central planning.

It is neither un-sober nor dogmatic to point out that this kind of thing has been tried before. We ought to expect that repeating the error will mean repeating the results.