I read short passages from some of the great books of wisdom daily. This morning, I happen to be in the middle of the Tao Te Ching. Number 60 of 81 entries reads:
Governing a large country
is like frying a small fish.
You spoil it with too much poking.
Let’s see…the stock market goes up, then down, by 500 or so points a day–usually right after Obama says something, anything. US debt is downgraded by S&P, but investors flood into Treasuries at abysmal interest rates. The Fed shows its hand by promising near-zero interest rates until mid-2013. Sounds to me like they have gone beyond poking into bludgeoning.
All around the world, we hear cries for our leaders to do something. Wrong. They have already done way too much. Hayek called this the “fatal conceit.” It is the belief that we can manage an economy for optimal outcomes by directing it command-and-control fashion.
The temptation comes from our ability to change some things. We can, for instance, make some people better off by taking money from others. What we see are the wonderful effects flowing from our intervention. When we take that money from someone we think has too much, we are that much more convinced we did the right thing.
What we don’t see are the hidden results of our meddling. The rich person is now unable to hire as many people, many of whom are just as needy as the recipient we happened to help. Further, the person to whom we give the money simply spends it in most cases, whereas the extra hire that rich person makes can result in more productivity, more jobs, and an economy that grows many times over.
The first reaction in a liberal’s mind is that the bad old market is mean and doesn’t give people what they “deserve.” Actually, it does, if by “deserve” we mean the degree to which the recipient helps other people get what they want. Even better, it sets up a dynamic wherein people who genuinely do want to participate and better themselves have more opportunities to do so.
The first reaction in a conservative’s mind is “what about the country?” Employing some vague notion of national strength, the conservative wants to favor its own industries by imposing tariffs and granting subsidies, ignoring the effects of the higher prices on consumers and the inefficiencies supported by meddling. Why get better when you don’t have to compete?
In both cases, the fatal conceit is hard at work. No economic system results in perfection, if by perfection we mean that everyone gets everything he wants or needs when he wants or needs it. What it does do is allow all participants in the system to put their efforts into genuinely helping other people get what they want, not what the government says they should put their efforts into.
This last is a foolish and destructive notion, and we as a country are doomed if we do not disabuse ourselves of it. The power players we see in the headlines each day are fools, and we put them there where they can do unimaginable amounts of harm. Our salvation will come only when we trust individual people to make mostly good decisions freely. The bad decision-makers will learn quicker, the good decision-makers will get even better, and the world will zip along on a giant wave of human ingenuity. No more relying on meddlesome cooks–we have other fish to fry.