Reason demands human control of events. It also dictates in organic systems, noninterference. Our sense of controlling the whole economy as opposed to regulating its market players is based on an spurious assumption. Our elective representatives think they are controlling a linear event with an accurate computation of the variables and that correct forecasts can be the result. A linear event is something like a car engine running; a nonlinear event is something like a hockey game. The one is a predictable; the other is uncertain. The control of the former is in effect tuning the engine so it performs while it is being driven wherever the driver so desires to go. Controlling the choices of each of the players on the ice from the bench while they played a game would in effect be a disaster. It would even destroy the game altogether if every team did it. Controlling a nonlinear event is a form of scientism. This is true especially taken to the study of the economy. Scientism is the misapplication of the methods of the physical sciences to the social ones. The belief that the methods of natural science form the only proper elements in any philosophical inquiry.
Scientism is also a form of interventionism, a policy thoroughly discredited on many fronts, in fact, too many to be repeated in a short article such as this. Most importantly, the economy as a whole is an organic complex nonlinear system. A planner would have to be Steven Hawking on coke times a million of his brain size to navigate between even a fraction of the interdependent events of such multitude. No super computer can yet reckon the whole system even if adequate information could be fed into it.
Markets are built on feedback and oncoming and persistent information. Just as importantly, they’re also built on misinformation, false hopes, unseen underlying cycles, time lags and economic miscalculations. Human beings are fallible. Corrections over time are inevitable. The system is dynamic. Crashes, recessions and depressions are going to occur. It’s only a matter of when, but even this can’t be accurately predicted. The economy must be known by its individual human action, yet the more participants, the greater the complexity. State regulation sets off consequences which determine other unintended results, puts across still more effects, then initiates a compounding event over time into a calamitous outcome.
The attempt to smooth out economic bangs, bumps, recessions, and depressions in presumptuous policy has the net effect by way of analogy of locking your child in a closet as he grows in the fear he will catch colds influenzas and meet with other dangers, guaranteeing a shorter less dynamic life for your youngster. Kids need colds and flue viruses to build their immune systems. Markets need recessions and depressions to correct and renew prosperity. Creative destruction, bank runs, innovations and rejuvenation are essential to the creation of wealth.
While it is true that free market economy’s ideology aligns with individualism, a closed system isn’t a matter of neutral choices: state control itself fosters an ideology of collectivism. Socialism may not be wrong politically, but the consequences of interventionism make it ineffectual. Policy which prevents fluctuations, slumps and depressions in an organic complex system, is linear thinking for an nonlinear event.
Some regulation is necessary to prevent fraud. Arbitration is best effected globally and locally at once. The rules of the game should be applied fairly and universally in all markets. Policies which suppress wild adjustments to forestall unwanted events expose the system to a greater oncoming mess. None are as dangerous to the whole system as state insolvency, especially caused by going into debt propping up troubled markets. Arbitration in this case is like the old East Germany Stasi compared to ordinary policing. The latter represents the desire for law and order among good people (to keep the traffic flowing as it were), and the former represents a system which kept everyone in poverty while meaning to raise everybody up.
Ludwig von Mises and other Viennese philosophers have shown two classical consequences marching hand in hand. Socialism is the overall policy which inadvertently sterilizes a complex organic system with benign economic planning while not meaning to utterly destroy the system of creating wealth. Despite its best efforts it does so anyway. Secondly, it isn’t about laissez faire versus regulation but whether an individual economically plans for himself or has someone or some other group do the planning for him.
A nonlinear event like the market economy can’t be adjusted, and the tweaking itself, is antithetical to the result. If busts didn’t occur the market would stagnate into an undynamic closed system of retrograde results: poverty for the many; riches for The New Ancien Régime. Complex concepts need a staid hand. The seemingly logical necessity to command an organic evolving event like the market is beyond human capacity. Until it is, nonintervention is the only reasonable choice.
Nothing the state can do presently alters the fact that there are trillions of dollars of bad debts that must be removed from the states’ and markets’ ledgers before a sustainable global recuperation can commence worldwide -- there is no global liquidity anywhere. Debt liquidation can occur either all at once (one to two years in a severe decline, i.e., paying off your debts) or gradually in a far longer decline (10 to 15 years, i.e., inflating the economy to pay the debt by printing money).
With the indication of further massive federal debt in the USA and a call for further consumer spending, it isn’t too soon to say which it will be. Start planning for the next decade with the rational that solvency might be your biggest asset. In a depression, virtue returns to savings and working, and consumerism as merit for its own sake, will in hindsight be looked on as morally grotesque. The false economy known as the swinging twenties are now! They are what back then was called “New Economics.” Wealth based on spending. Once again, those days are quickly ending.
