Fiatch

Listen to Robert Higgs’ “The Welfare State and the Promise of Protection” via Mises.org.

Dr. Ron Paul spoke with Lew Rockwell on the ever-advancing federal power.

“More people died from the innoculation than they did from the flu” is both a direct tragedy and also a sadly apt metaphor for all this corporatist government intrusion.

HT C4L

Congressman David Scott’s high-profile fail yesterday is but the tip of an iceberg.  These officials are only beginning to feel the strain.  They are, by design, setting themselves (and us) up for inevitable, ceaseless FAIL.

His response is almost understandable.  Given that government cannot fairly (so-called) allocate scarce resources across the entire health-care system, of course it would make his life easier to:

• shout people down;
• loudly proclaim his own position of power;
• hide behind bureaucracy to disguise accountability;
• attack the decency of anyone who dares to disagree;
• falsely imply openness and benevolence while actually embodying their opposites;
• deny the legitimacy of opposition by counting only those who agree with him as constituents; and
• avoid answering the press.

The Fatal Conceit is real and unavoidable.  This tiny group of government bureaucrats cannot possibly hope to manage the health-care economy.  Clearly, some things that should not have been forgotten were lost.  They are going to fail, and it is going to hurt.

Also understand — health-care reform characterized by market allocation instead of central command would bring many benefits.  Within such an effort, there would naturally be many failures.  Competition and free trade, though, would sift among alternatives to uncover successes, further innovations, and yield progress.

That’s how it works.

Please watch this outstanding rerun.   Polite and logical, plain-speaking and brilliant, convivial and unrelenting, inquisitive and steady — Milton Friedman was a wonderful champion of capitalism.

Let’s strive to follow his example.  The world swims in noise and would benefit from more calm and confident voices like his to defend liberty and free trade.

Entrepreneurship is hope and change that yields an open tomorrow.  Centralized power is an old, sad, terrible road that leads to a dead end.

Please read “F. A. Hayek and the Fatal Conceit of [President] Barack Obama:”

BY STEVEN HORWITZ

The headlines blare that President Obama will “restructure the financial services industry” and “fix the health care crisis.” A 31-year-old with no experience in the business world, but a lot of experience in politics, has been put in charge of dismantling General Motors.

Members of Congress lecture car manufacturers and mortgage lenders on how to do their jobs. Politicians keep taking on more and more responsibility for the U.S. economy, as each industry appears to be getting its own “czar.” Unfortunately, more czars will not produce better cars, or health care, or mortgages, or much of anything else.

The belief that one person or group, no matter how smart, can know how best to allocate resources is a classic example of what the Nobel Laureate economist F. A. Hayek called “the fatal conceit.”

In Hayek’s view, what enables businesspeople to make good decisions about the allocation of resources is not that they are smarter than other people. Instead, two other factors are key.

First, businesspeople have very detailed knowledge of their particular corners of the world. They know where resources are, where their customers are and what they want, and have the experience of knowing how to deliver it. This is not about being “smarter,” but about having local and contextual knowledge that others don’t have.

Second, entrepreneurs develop this knowledge by making use of the signals provided by prices, profits, and losses. Prices guide entrepreneurial decision-making by enabling them to formulate budgets and estimate the profitability of the various choices they might make.

Profits and losses provide information after the fact about how well they chose. Profits signal them to continue, while losses tell them that resources need to be reallocated. By acting on the basis of that information, each entrepreneur contributes to the overall improved allocation of resources.

The lesson from Hayek is that when the rules are right, markets are collectively much smarter than any individual or group within them. This is the lesson that the Obama administration has utterly missed.

The administration evidently believes that experience in policymaking is an effective substitute for the local and contextual knowledge of how to produce goods and services. This is a complete misunderstanding of the way in which markets work and what kinds of knowledge matter.

Much of the same is true with Obama’s supposed fixes for health care and financial services. Imposing a vision of how an industry “should” work and how it should produce and deliver its products from the top down is the height of political hubris.

The conceit behind it is one that dates back to the earliest visions of socialist central planning. Even as belief in that more comprehensive vision has died, the mindset behind it is still manifested in the belief that top-down fixes driven by well-meaning political actors are more rational than letting individuals with their local knowledge coordinate and cooperate via markets.

When politicians such as Barney Frank lecture financial executives on their lending practices, they too are guilty of the sort of hubris Hayek identifies.

How they know better what it takes to run a business is not at all clear, especially since many of them have never done so. This sort of second-guessing of business inevitably gets politicized as there is no other basis for decision-making by politicians who are ignorant of the detailed, contextual knowledge on which effective entrepreneurship relies.

Absent the signals of the marketplace, czars, presidents, and members of Congress are thrashing around in the dark in their attempts to improve upon the outcomes generated in actual markets. Top-down directives forgo the opportunity to learn from the decentralized knowledge of those actually producing the goods and services in question.

Obama’s reliance on experts and czars and top-down restructuring is particularly ironic in light of his promises of change and bringing the spirit of 21st century technology to government.

The clearest lesson of the networked world is that decentralized, bottom-up collaboration works much more effectively than top-down solutions. From Wikipedia, to open source software, to the Internet itself, the 21st century is quickly becoming the century of the “wisdom of crowds.”

Young people understand how contributing their own contextual knowledge to aggregating and signaling processes on the Web make all of us more effective users of information through shared knowledge. Whatever its flaws, Wikipedia could never be written by an Information Czar or Task Force.

Hayek recognized decades ago that markets work in precisely the same way. To think otherwise would be to suffer from the fatal conceit. Czars and second-guessing politicians with grand designs will only frustrate the much more effective decentralized processes of the market.

Even as they communicate constantly through the Internet, probably using open source software in the process, Obama and his administration, in their hubris, continue to believe that industries need czars and that individuals and committees are smarter than collaborating, distributed collectives. We can only hope that conceit will not be as fatal as Hayek feared.

In his excellent book Capitalism, George Reisman stated:

Even if global warming turned out to be a fact, the free citizens of an industrial civilization would have no great difficulty in coping with it—that is, of course, if their ability to use energy and to produce is not crippled by the environmental movement and by government controls otherwise inspired. The seeming difficulties of coping with global warming, or any other large-scale change, arise only when the problem is viewed from the perspective of government central planners.

It would be too great a problem for government bureaucrats to handle … . But it would certainly not be too great a problem for tens and hundreds of millions of free, thinking individuals living under capitalism to solve. It would be solved by means of each individual being free to decide how best to cope with the particular aspects of global warming that affected him.

Individuals would decide, on the basis of profit-and-loss calculations, what changes they needed to make in their businesses and in their personal lives, in order best to adjust to the situation. They would decide where it was now relatively more desirable to own land, locate farms and businesses, and live and work, and where it was relatively less desirable, and what new comparative advantages each location had for the production of which goods. Factories, stores, and houses all need replacement sooner or later. In the face of a change in the relative desirability of different locations, the pattern of replacement would be different. Perhaps some replacements would have to be made sooner than otherwise. To be sure, some land values would fall and others would rise. Whatever happened individuals would respond in a way that minimized their losses and maximized their possible gains. The essential thing they would require is the freedom to serve their self-interests by buying land and moving their businesses to the areas rendered relatively more attractive, and the freedom to seek employment and buy or rent housing in those areas.

Given this freedom, the totality of the problem would be overcome. This is because, under capitalism, the actions of the individuals, and the thinking and planning behind those actions, are coordinated and harmonized by the price system (as many former central planners of Eastern Europe and the former Soviet Union have come to learn). As a result, the problem would be solved in exactly the same way that tens and hundreds of millions of free individuals have solved much greater problems, such as redesigning the economic system to deal with the replacement of the horse by the automobile, the settlement of the American West, and the release of the far greater part of the labor of the economic system from agriculture to industry (pp. 88-89).

as excerpted in “Environmentalism Refuted” by George Reisman at Mises.org.

From Reason.tv:

At Reason’s 40th anniversary event, held in Hollywood on November 14 and 15, the American Enterprise Institute’s Peter Wallison analyzed the roots of the current market meltdown and explained how government policies directly caused or massively exacerbated the housing bubble and the subsequent bust at the center of things.

The Arthur F. Burns Fellow in financial studies and codirector of AEI’s program on financial markets deregulation, Wallison is the author of several books including most recently, Competitive Equity: A better way to manage mutual funds.

So awesome.  I have been working on a post aimed at exactly this same target.  Wealth Is Not The Problem just hit the bull’s-eye.

Mr. President, let the market run.  Folks, if you think this current crisis is about capitalism run amok, you’re doing it wrong.  :)  The market is, well, liberating — in so many ways.

I’ve realized I’ve lately spent too much time and energy only chronicling Keynesian folly.  I now intend also to engage topics like entrepreneurship, markets, and other positive forces that we all can access more readily than ever before.  Crisis be damned.  Markets will advance.

Make sure you’re getting the RSS feed from Wealth Is Not The Problem.  Great stuff.

The IHT reports “Chavez sends troops to Venezuelan rice companies.”

Highlights:

President Hugo Chavez on Saturday ordered troops to temporarily seize control of all Venezuelan rice processing plants to ensure they produce at full capacity amid soaring inflation and persisting reports of food shortages.

Chavez told the National Guard to “take control of and intervene in all of these businesses that process rice in Venezuela,” including at least a half-dozen local and foreign private companies.

Agriculture Minister Elias Jaua said troops would occupy company installations as “the first measure” in an unspecified takeover process, beginning with a rice plant owned by Empresas Polar, the country’s largest food producer.

Other major rice producers operating in Venezuela include Minneapolis-based Cargill, which owns the Santa Ana Rice Plant in Portuguesa state. Jaua said Caracas-based Corporacion Mary, which produces four types of rice under the brand name “Arroz Mary,” will be affected.

On Saturday, Chavez warned that any rice processing company that threatened to halt output would be permanently seized by the government.

In the past two years, Chavez has nationalized four major oil projects and some of the country’s biggest electricity, telecommunications, steel and cement companies.

President Chavez is a thief and a thug, which is to say, a Communist leader.  Nationalization is a menace. His tyranny threatens us all.

Always and especially as such crooks are on the rampage, it is irresponsible of the United States government to attempt to scapegoat capitalism for the failings of state policies.

Do not lose heart.  Not all are fooled, and thus not all is lost.  Let’s do what we can.

[photo source]