Here’s a letter to an economist who alleges that my “obvious lack of sophistication with the latest econometrics” causes me to “miss economics’ power for improving the world.”
You wonder how I, “a professional economist can have such little belief in economic science” that I “deny intelligent, data driven interventions would improve on the specializations and trade outcomes materializing on laissez faire markets.”
I shall try to tell you.
The patterns of trade and specialization that arise in free markets don’t “materialize” as if they’re rabbits pulled out of magicians’ hats. They result from billions of consumers and investors each spending his and her own money, and entrepreneurs and businesses being free to compete for the favor of consumers and investors. The resulting prices, profits, and losses are the only information sources known to humanity that can, with any success at all, coordinate a globe-spanning web of productive cooperation and competition among these billions of strangers.
Economic science – properly done – drives home the unfathomable complexity of the economy and makes laughable the many pretenses that too many people have of being able to improve upon economic outcomes with the likes of tariffs, subsidies, and price and wage controls. My confidence in free markets – free markets embedded in a system of property and contract rights and the rule of law – springs not from an inadequate appreciation of economic science or from my admittedly poor skills at econometrics but, instead, from what I believe to be a genuine understanding of the deepest lesson taught by economics, namely, that the human mind is far too puny to grasp the details that comprise the complexity of markets.
I leave you with this insight from the economist Deirdre McCloskey:
Economics is the science of the postmagical age. Far from being unscientific hoobla-hoo, economics is deeply antimagical. It keeps telling us that we cannot do it, that magic will not help. Only the superstitious think that profitable forecasts about human action are easily obtainable…. Economics itself says that forecasts, like many other desirable things, are scarce. It cannot be easy to know which great empire will fall or when the market will turn…. Some economists allow themselves to be paid cash money to answer such questions, but they know they cannot. Their very science says so.*
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
* Deirdre N. McCloskey, “The Art of Forecasting: From Ancient to Modern Times,” Cato Journal, Vol. 12, Spring/Summer 1992, page 40.