No Planning

by Don Boudreaux on September 2, 2008

in Complexity & Emergence, Current Affairs, Economics, Energy, Myths and Fallacies

Here’s a letter that I sent today to the Wall Street Journal:

Crusading for a national “energy plan” and upset that WSJ columnist Holman Jenkins isn’t on board, T. Boone Pickens asks rhetorically: “My father used to tell me that a fool with a plan is better than a genius with no plan.  So I ask, what’s Mr. Jenkins’s plan?” (Letters, Sept. 2).

Contrary to Mr. Pickens’s assumption, an economy is not simply a gigantic business firm.  An economy is both incomprehensibly more complex than is even the largest multinational corporation, and it has no specific, overriding purpose comparable to a firm’s goal of maximizing profits – a purpose by which the performance of each employee and each investment decision is relatively easy to evaluate.  So while plans and some measure of central direction make sense for firms, comparable plans and direction for an economy are poison.  They prevent the on-going decentralized, competitive experimentation from which spring not only progress that is unplanned, but progress whose details could not have been foreseen before they actually materialize.

The Soviet Union famously had plans for its economy; the United States did not.  Which country was the fool?

Sincerely,
Donald J. Boudreaux

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{ 16 comments }

Oil Shock September 2, 2008 at 6:17 pm

Holman Jenkins – isn't he the one who suggested that the Government use tax payers money to acquire and demolish unoccupied homes?

Eric Essig September 2, 2008 at 8:00 pm

Holman Jenkins rocks

Ryan Fuller September 2, 2008 at 8:33 pm

We need a man who can make a plan WORK!

Ryan September 2, 2008 at 8:41 pm

"We need a man who can make a plan WORK!"

I think the point was: there is no 'man' smart enough to make it 'work'. Mans limited capacity for information, and the complexity of an economy, do not allow it.

LoneSnark September 2, 2008 at 8:49 pm

Ryan, he was quoting the road to serfdom.

Ryan Fuller September 2, 2008 at 8:52 pm

Yeah, I know. I was actually quoting the flash summary of Hayek's 'Road to Serfdom' that was posted at the Ludwig von Mises Institute's website, specifically the part after the 'plan' fails and the people start looking for someone to give expanded powers to. I guess it was a bit obscure.

I fully agree with your position. Looking for central "plans" isn't going to solve anything.

Bruce Hall September 3, 2008 at 9:24 am

Perhaps "policy" is more appropriate than "plan."

The present government "policy" for energy, for example, is to create barriers for the supply of some resources while artificially cheapening the supply of others. The presumption seems to be that if consumers disassociate the cost of taxes-to-subsidies from the direct purchase price of subsidized products, they will demand more of such products and less of the restricted products. Well, they are correct, but are they right?

Political agendas simply have the effect of skewing what would otherwise be efficient and effective markets. Can you say "Carbon Credits?"

What might be a reasonable approach to the government's involvement in energy? Perhaps supporting pure research. That was obviously necessary for the development of atomic weapons. But nothing is to say, while unlikely, that the next great leap in energy won't come from an eccentric's garage?

Bill Nichols September 3, 2008 at 9:41 am

I like express the sentiment as follows:
"central planning made the Soviet Union what it is today."

Bruce Hall September 3, 2008 at 10:13 am

One other point>

At Econbrowser, the argument was made that China developing Iraqi oil fields would benefit all because "a rising tide lifts all boats." I agree in principle.

However, I couldn't help but post the following comment:

Does anyone else find it slightly incongruent that so many see the benefits of "a rising tide lifts all boats" while supporting the U.S. government's policy of restricting domestic oil and natural gas resources? Apparently, as long as the tide of oil comes from elsewhere, we are happy to have our boats float higher.

Chris September 3, 2008 at 10:30 am

I fully agree. The idea of a centrally planned economy is horrible. In the end, the government ends up messing things up more that it ever helps.

The problem, though is that saying "I don't think a plan is a good idea" is not politically compelling. With regard to energy policy, the better approach is to point out all the ways that the government has messed things up (e.g., the ethanol mess) and make your plan getting rid of those things. It's no wonder that the areas which are the most messed up are also the most regulated.

John Dewey September 3, 2008 at 10:30 am

"What might be a reasonable approach to the government's involvement in energy? Perhaps supporting pure research."

I've gone back and forth on the value of government-directed "pure" research.

Energy companies would be investing billions into energy research without any incentive from governments. They've been funding such research for decades.

Isn't it likely government-directed research would divert effort from the most promising energy sources to those sources which provide the most political leverage – and bribes – for elected officials? Would corn-based ethanol research have gotten anywhere if the Iowa caucases were not so important in the election process?

IMO, nothing advanced by politicians can ever be "pure".

SteveO September 3, 2008 at 12:01 pm

More rent-seekers show up at the trough. Pickens saw how the agri-ethanol rent-seekers made out and said "damn, why didn't I think of that. Oh well, still plenty left for second in line."

Methinks September 3, 2008 at 12:10 pm

…the better approach is to point out all the ways that the government has messed things up (e.g., the ethanol mess) and make your plan getting rid of those things. It's no wonder that the areas which are the most messed up are also the most regulated.

I agree with the last sentence. Unfortunately, you suggestion has been tried to no avail. I don't know anyone on either the right or the left who supports either ethanol or farm subsidies and all have been ceaselessly pointing out the folly of these programs. Yet, they persist. D.A.R.E. (the stop drug use program in schools) has proven to be a colossal waste of money. Yet, there's no move to cut funding to this program while moaning and whining about lack of funds for this or that necessity persists (including about cutting music and sports – the two activities that actually have been shown to reduce drug use among kids). Oh, we could go on all day. Not doing anything is never politically compelling. Until we have a constitution which prevents government meddling, we're compelled to live with this rubbish.

Russell Nelson September 4, 2008 at 2:24 am

The Town of Potsdam Planning Board approved a transfer station last night. They're going to force him to build a 10' chain link fence around the station. Rationale? To keep the trash from blowing onto other people's property. Of course, none of the other transfer stations in this or nearby counties actually HAVE this problem. Instead, they have low stock fences, or split rail fences.

Thank *GOD* that SOMEBODY is planning these things out!

(Of course, the NYS-DEC already prohibits transfer stations from leaking trash, so it's pointless. It'll cost $120,000, but it's pointless. You can imagine how livid the builder is, after two years of waiting for his building permit.)

PaulD September 5, 2008 at 9:52 am

If T. Boone Pickens wants to invest his own money in his energy plan and persuade other investors to join him, I'm all for that. But I suspect he wants to the government to parnter with him with direct subsidies and tax breaks. That's "picken" my pocket and I'm against it.

Rudy September 5, 2008 at 6:11 pm

Paul,

Right on, T. Boone, from what I understand, does have a vested interest in some of the issues he wants us all to ´join in on.´

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