The core of the point that I try to make in my March 18th, 2009, column for the Pittsburgh Tribune-Review is relevant today. You can read my column beneath the fold.
Biased imagination
Imagine traveling back in time to 1809. You describe to some people you befriend the reality of personal transportation in America in 2009. You describe the automobile.
In your own mind, of course, you’re describing an ordinary contrivance that makes possible experiences that are perfectly ordinary to denizens of the early 21st century, such as zooming along at 70 mph. But to your early 19th-century listeners, you’re describing a barely imaginable wonder.
“What?!” they ask. “People in the future will drive machines made out of metal and filled with highly flammable liquids? Surely that will be intolerably dangerous. And to what purpose? No one has any need to travel at such unheard-of speeds!
“And even if we could trust ordinary men to operate such contraptions,” your early 19th-century friends ask, “how can these machines become a reality? Such things are impossible!”
You explain that private market forces will bring about such machines starting about 100 years in the future. No government will plan their creation. Individual inventors and entrepreneurs will each experiment and take risks creating “cars.” Many will fail; some will succeed; a few, such as Henry Ford, will succeed fabulously. And the course of the “evolution” of automobiles, from their first “horseless-carriage” prototypes to the sleek computer- and cup holder-infused vehicles that people drive in 2009, will be the result not of a grand plan but of piecemeal creative genius tempered by ongoing market competition.
I suspect that your friends in 1809 would not believe your account. And what I suspect they would find most unbelievable is not the progress of technology that automobiles require. Rather, what would be most difficult to comprehend is the fact that such an amazingly complex development and coordination of economic activities can occur without being consciously arranged. After all, it’s not just that people in 2009 can easily afford automobiles, but also that whole industries exist to support automobile driving.
Oil exploration and refining, tire manufacturing, steel production, auto-parts making and retailing, automobile insuring, road-building — these are only some of the many industries whose existence is promoted by, and whose existence promotes, automobile manufacturing. Yet no one designed, or even foresaw, this outcome. No one designed how all the many industries’ efforts are coordinated with each other. This outcome evolved into its modern-day pattern through billions upon billions of individual decisions, some bigger than others, but none larger than a tiny part of the total number of decisions that combined with each other to make automobile driving an unremarkable reality in the early 21st century.
Stupendous coordination of millions of individual plans and talents emerged spontaneously — and not only in the automobile industry. The entire economy is a testament to such spontaneous coordination.
The single greatest fact about capitalist society is that the great bulk of it appears to be the handiwork of a master designer but, in fact, is unplanned and even unimaginable before it becomes real and familiar.
Remember this lesson whenever you hear alleged “experts” insisting that only conscious effort by government to “stimulate” demand can save the economy from its current downturn.
It’s true that no one can know beforehand the precise path by which a free market travels to escape the downturn. No one can foresee that, say, entrepreneurs in Texas and Ohio will be especially creative at finding ways to produce things that consumers will open their wallets wider to buy — and, hence, that these entrepreneurs will succeed at launching profitable firms that hire more workers.
No one can foresee exactly when, say, the increased efficiencies that the downturn obliges many established firms to pursue will make those firms again attractive to investors who then pump more money into them, enabling these firms to expand operations.
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.
