≡ Menu

Markets Outstrip Our Imaginations

Keynesians believe that the economy is a far simpler institution than it really is — Keynesianism is no product of the Scottish Enlightenment.

In my latest column appearing in the Pittsburgh Tribune-Review, I make a case for the creative and coordinative powers of free markets, including the case that economic recovery does not require fiscal stimulus.  Here are my concluding paragraphs:

No one can foresee or predict any of the details about how recovery will happen.

But economics and history tell us that our inability to foresee and
predict — or even to imagine — how recovery will come in the absence
of conscious government stimulus is no reason to conclude that recovery
requires conscious government stimulus.

Yet, despite all of our experience with the marvels of free markets,
the case for the massive government stimulus plans rests chiefly on
people's fear that this time the market will fail.

Why suppose that this situation differs from the countless other
coordination challenges successfully met by market forces? I can think
of no good reason other than the fear that oozes from biased
imaginations. Despite experience that should teach us differently, we
can imagine market failure much more easily than we can imagine just
how markets will succeed.