HERE'S WHY OBAMA'S "STIMULUS" PACKAGE WILL FAIL: "The Economy is Not a Machine"

Excerpt:

... the whole idea of fixing, running, regulating, designing, or modeling an economy rests on the notion that, if the right smart guys are at the rheostats, the economy can be ordered by intelligent design. But the economy is no mechanism. There is no mission control. Government cannot swoop down like a deus ex machina to explain the inexplicable and fix the unfixable. Why? Because the knowledge required to grasp each of the billions of actions, transactions and interconnections would fry the neural circuitry of a thousand Ben Bernankes. This is what F. A. Hayek called the knowledge problem. Knowledge, Hayek reminded us, is not concentrated among a few central authorities but is dispersed around society. That's why bad unintended consequences follow government interventions like black swans.

A few economists have not succumbed to the "fix it" fixation. They know that society is not like a machine at all, but an ecosystem. Faster than you can say market fundamentalism, a Keynesian will scoff at this metaphor. But his favorite trope has helped to stagnate many an economy; making Rube Goldberg apparatuses out of means-ends networks, perversion out of productivity. As Czech President Vaclav Klaus wisely notes: "The market is indivisible; it cannot be an instrument at the hands of central planners."


Society as Ecosystem

So if not the machine metaphor, why an ecosystem? Economies, like ecosystems are complex adaptive systems. Nature, including the economy, can experience episodes of wild wobbles, fluxes and flows. But it almost always returns to a steadier state known as "ordered chaos." That is, when it's left alone. In clumsier but perhaps more familiar language—ecosystems tend towards equilibrium.

Both ecosystems and economies are distributed systems. In the former, billions of interdependent means-ends activities are a reflection of a billion preferences and choices. In the latter, species are dynamic and interwoven in a web of relationships. For both, the whole system is an ever-evolving cascade of change that is unfathomable to a single mind. Data snapshots may be useful for some things, but should not be intended as blueprints for government planners. Even sophisticated computer models will, like the old Philips machine, eventually fail. There are no oracles.

Once we come to discover not only that the economy is an ecosystem -- but that the laws of ecosystems are very different from the laws of machines -- we'll resist our urge to fix things from the top down. We'll realize that economic growth is a holistic process that happens by virtue of countless adjustments and adaptations within the system itself. That's why economic planning is, and always has been, a form of hubris.

RTWT.

• THIS IS WHY CENTRAL PLANNING - EVEN BY SMARTIE-PANTS FELLAS LIKE OBAMA - CAN'T WORK, AND WHY GOVERMENT SHOULD JUST CUT TAXES AND GET OUT OF THE WAY.

• THIS IS WHY OBAMA'S "STIMULUS" PACKAGE IS A BOONDOGGLE AND IS DOOMED TO FAILURE.

• AND WHY WE MUST FIGHT IT.

CAN WE DEFEAT IT?

YES, WE CAN!