Up Sucker Creek

Up Sucker Creek
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Friday, October 17, 2014

Nobel winner's caution about government

Wall Street Journal, October 13, 2014
A Nobel Economist's Caution About Government
By Donald J. Boudreaux and Todd J. Zywicki

Forty years ago the Nobel Prize in Economic Science was awarded to a scholar who believed the prize perhaps should not exist.  As he graciously accepted the distinction in 1974, Austrian-British economist Friedrich A. Hayek worried aloud that thinking of economics as a science night fuel what he called "the pretense of knowledge"- the idea that anyone could know enough to engineer society successfully.  He was right to fret.

Hayek's greatest contribution to economics was to show that society is far more complex than we realize, with little pieces of knowledge dispersed among millions of individuals.  "The curious task of economics," he famously wrote in "The Fatal Conceit," which he published in 1988, "is to demonstrate to men how little they really know about what they imagine they can design."

Such hubris and it's inevitable results (the unforeseen consequences of the Dodd-Frank and ACA legislation) would not have surprised Hayek.  In the 1970s he saw government policies create the inflation they were designed to avoid.  Government has shown again and again the folly of experts to centrally direct complex systems.

What does Hayek recommend?  A little humility.  "We shall not grow wiser before we learn that much that we have done is foolish,"  he wrote in his 1944 masterpiece, "The Road to
Serfdom."  It was the book's central lesson that hubris makes us not only poorer but also less free.  Today's leaders would be wise to become better students of the late Nobel Laureate.

Mr. Boudreaux is a professor of economics at George Mason Universityb, where Mr. Zwickau is a professor of law.  Both are senior fellows at the america tubs Center's Hayek Program for 
Advanced Study in Philosophy, Politics and Economics.  

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