In virtually every political race, all of the candidates running will put out some kind of economic plan. Most of them offer platitudes and vague policy prescriptions, but some of them actually feature a good bit of detail. Regardless, none of them will deliver as promised.
Here in central Kentucky, we are in the midst of a very hotly contested congressional race.
The Democratic Party Challenger’s most oft-touted qualification is the fact that she personally bombed people in the Middle East. Amy McGrath was a Marine pilot who flew 89 combat missions. If you live in this district, you know this. Every single campaign ad the McGrath camp runs reminds you of this fact. And believe me – they run a crap-load of campaign ads.
But last night, I saw a new commercial. It promotes her “detailed economic plan.” (The ad still has a picture of her standing in front of a fighter jet – because bombing.)
Now, I haven’t thoroughly read this economic plan. But I don’t have to. It won’t work.
Because you can’t “plan” an economy.
Just ask the Russians.
I had a plan for last Thursday. Then my car broke down Wednesday night. It completely blew up Thursday’s plan. My wife and I had to figure out different transportation arrangement. That required me to rearrange my entire schedule. I had to make time to go up the car from the shop once repairs were complete. It also resulted in an unplanned $400 disbursement from my checking account.
So, what does my broken down car have to do with an economic plan? It underscores the fundamental problem with planning. We can’t anticipate everything. We can’t account for every contingency. And when it comes to trying to run something as complex as an economy, we can never foresee the unintended consequences of whatever action we take.
Nobel Prize-winning economist Friedrich Hayek called this the “knowledge problem.” Hayek wrote:
“What is the problem we wish to solve when we try to construct a rational economic order? On certain familiar assumptions the answer is simple enough. If we possess all the relevant information, if we can start out from a given system of preferences, and if we command complete knowledge of available means, the problem which remains is purely one of logic.”
Those ifs present a problem. Hayek went on to write:
“The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.”
Amy McGrath does not have the knowledge necessary to plan the economy, despite her prowess at bombing other countries.
In fact, nobody does, nor does any group of individuals. I don’t care how many Ph.D.s they might have. Just think about the ridiculousness of McGrath’s proposition. We’re going to send her to Washington D.C. with a 32-page “plan” that will “fix” the economy here in Kentucky.
Sure. Ok. What could go wrong?