Monday, January 4, 2016

Global Meltdown -- Too Much Policy

"Policy makers" are forever patting themselves on the back for their policy successes.  But, what are these successes?

Economies grow because individuals are given the freedom to use their own "local" information to improve their economic well being.  In the aggregate, this unleashing of human activity is the only real source of economic growth.  That technology grows is simply a byproduct of this "local" unleashing of human activity.

Governments have put chains around individual freedom to act on "local" information by well-intentioned laws, regulations and rules.  These laws, regulations and rules were designed to promote fairness or other noble objectives, but their impact has been to stifle the freedom of action that individuals need to pursue their own interest.  This pursuit of their own interest is the only real engine of economic growth.  Hence, no growth.

Enter the policy makers.  Imagine, you wanted to slow the number of individuals killed in traffic accidents yearly.  How would you do that?  One sure way to do that is to outlaw the use of automobiles and trucks.  How can anyone be hurt in an automobile or truck accident, if there are no automobiles and trucks.  As President Obama said recently, "if only one life can be saved, then it is worth doing."  He was speaking in the context of gun control, but the logic of his argument applies equally to anything else.

Would economic growth be affected by the abolition of motor vehicles?  The answer, according to policy makers, is "no."  So long as monetary and/or fiscal policy is set appropriately, outlawing things doesn't make any difference.  Hence, regulations, rules, and laws are irrelevant according to policy makers.  So why not simply outlaw all economic activity (something the Obama folks may have considered but abandoned because of a recalcitrant Congress) and then run an accommodative monetary and fiscal policy.  That should do the trick, according to today's policy makers.

Globally, big government rules the roost.  The result: no economic growth.

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