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Quotation of the Day…

… is from page 104 of the 2016 Mercatus Center re-issue of my late colleague Don Lavoie’s excellent 1985 volume National Economic Planning: What Is Left? (footnote deleted; original emphasis):

unknownRivalrous competition means that one agent’s plan can succeed only at the expense of some other, incompatible plan. In such circumstances (which always exist in the real, disequilibrium world) adding together the values of the capital used by rivalrous firms has about as much meaning as adding the value of a bridge to the value of the bomb being built to blow it up.

DBx: Economic statistics have many valuable uses, but they must be approached and interpreted with uncommon care.  For a number of reasons, the real-world economy is not the same entity as even the ‘best’ array of statistics that describes it.  Therefore, manipulating real-world economic phenomena based upon statistics might very well produce ill-unintended consequences even if the result of such manipulation is to cause the statistics all to change in desirable ways.

This ‘best’ array of statistics that describes the economy cannot possibly capture and reveal more than an insignificant fraction of the important details – what Hayek called “knowledge of the particular circumstances of time and place” – that prompt each of the billions of individual economic agents to act in the ways that he or she acts at each moment in time.  It is information and knowledge on the spot, on the ground, in the rich context of each individual’s preferences, abilities, and expectations that direct and incite the actions of these individual agents.  And it is the interaction of these agents’ actions that is constantly producing economic order or disorder – economic order or disorder that is not and could not possibly be designed or intended by anyone.  Understanding the logic of such human action, as well as of how these actions combine with each other to produce whatever economic patterns they produce (which patterns might be accurately enough described by statistics) is the core mission of the economist.