Well, let's make that
all the President's people.
In some circles, not the smallest of which is the President's policy circle, there is this notion that the economy is an engine that has stalled and needs some kickstartin' by
smart people with degrees who know what they are doing.
So, a lot of
smart people with degrees are going around kicking the snot out of the economy.
The economy, is not an engine. The economy is the totality of all economic decisions and actions made by millions and millions of individuals each of who tries to figure out the right course for his or her particular situation.
In making their decisions, these individuals, not cogs in a machine, have to take their expectations regarding the future into account.
However, when you look at the President's policy people, they act as if the Rational Expectations Revolution never happened.
I understand why: People who are not smart enough to figure out the math get intimidated very easily and fail to pay attention to the underlying arguments behind fascinating concepts such as Sunspot Equilibria and path dependence and instead try to relive the Great Depression they have yakked so much about to be able to get the degrees that certify them as
There are two broad categories of expectations right now: First, if you think you might succeed at producing something which would provide value to a lot of people, your expectation is that you will have to give up the returns from your willingness to take that risk to fund the debt service and income redistribution objectives of governments at all levels, lead, of course, by the Federal Government.
Second, if you don't expect to do well, well, you are hearing every day that the government will give you more unemployment benefits, free health care, free child care,
affordable housing, free or subsidized training, free or subsidized computers, internet connections etc.
The former expectation provides a disincentive to actually taking risks by people who might consider starting new businesses. The latter raises the lowest wage at which people will accept a job and thereby raises costs of production.
Against this backdrop, the President and his circle of
smart people will degrees cluelessly signal that they will kick profitable businesses and productive individuals some more to get them going.
I am saying nothing new. Hayek explained this more than 35 years ago:
If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible. He will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants. There is danger in the exuberant feeling of ever growing power which the advance of the physical sciences has engendered and which tempts man to try,dizzy with success, to use a characteristic phrase of early communism, to subject not only our natural but also our human environment to the control of a human will. The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men's fatal striving to control society - a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.