As the saying goes, “anything that can go wrong, will go wrong.” This pessimistic statement is known as Murphy’s Law, which states more accurately that “things will go wrong in any given situation, if you give them a chance.”
We generally know that the scope of variables that can go wrong in any given situation is much broader than those that can go right, and that the severity of those wrongs can outweigh even the benefits of a best case scenario.
You’ll probably be alright crossing a road with your eyes closed, but unless you get to drink from the Fountain of Youth on the other side, the payoff is unlikely to be as equally good as the bad outcome of getting flattened by a truck.
Likewise, I don’t know anyone who has ever been on such a great night out that it was worth them dying of alcohol poisoning.
Because things will go wrong in any given situation if you give them a chance, and because those things can be unexpected and potentially devastating, we adopt behaviours to mitigate risks, and we set rules where necessary to avoid making irrational gambits or harmful trade-offs. The more complicated and ambitious a plan becomes, the more likely we are to have made a mistake, and the more care we must take to make sure things don’t go wrong, rather than simply acting as though they’ll only go right.
How, then, does this apply to Government intervention in the economy?
When the Government intervenes in the economy, it does so with intent to achieve an outcome not currently occurring naturally. Sometimes, those outcomes can simply be the prevention of an obvious harm, such as restrictions on the dumping of toxic waste into rivers. Other times – and in fact, most of the time – however, the intent is to control against outcomes perceived to be undesirable, such as sin taxes to cut alcohol, sugar and tobacco usage, or for outcomes more closely aligned with social or ideological goals, as with the enforcement of a minimum wage to (allegedly) help the poor.
It’s worth remembering here something economist Henry Hazlitt wrote in Economics in One Lesson. “The art of Economics,” he explains, “consists in looking not merely at the immediate but at the longer term effects of any act or policy; it consists in tracing the consequences of actions and policies not merely for one group but for all groups.”
In other words, what you intend to happen will not be the only thing that happens, so you’d better be bloody careful.
The economy is highly complex. That might sound like a fatuously obvious statement, but it is hard to quite capture the whole essence of the economy or the wider significance in a single sentence. You are one of over 7 billion people in 190 countries, working within one of over 200 million businesses, each of which provides an untold quantity of goods and services to an untold number of consumers. Every person acts as an individual unit within this network, each making economic decisions according to their own unchartable sequence of time-sensitive information and preferences, from the simple fact of how much money they have right down to their own natural psychological biases. Individual transactional decisions per day could number in their trillions.
If we apply Hazlitt’s lesson to economic planning and intervention on a national or international scale, we soon realise that it’s extraordinarily difficult to know how policies might play out over time, nor how the immediate intended benefits to one group might filter outwards to other groups. Tracking, charting and planning fully against such an incomprehensible amount of data is usually reserved for Science Fiction like Iain Bank’s Culture novels, and for obvious reasons – it would be quite simply impossible in real life.
To listen to politicians though, you would be led to believe they can in fact achieve the impossible – that Labour nationalizations, Tory sin taxes, EU central planning, Trumpian trade warfare or Democrat Green New Deals will have exactly the outcomes politicians intend with full containment of the many and dreadful knock-on effects such grandiose plans could unleash.
The truth is, however, that politicians don’t actually have much more of a clue about the economy than you do. Many have never read Hazlitt and do not apply his principle or Murphy’s Law to their planning processes. They don’t exercise caution, take precautions, or consider the wider consequences of their actions. Those who think they know best are arrogant, even delusional, and invariably lead us to a more likely outcome than we’d ever lead ourselves – disaster.
This, ultimately, is the problem with economic intervention from the government. The complexity of the economy at scale is such that any and all decisions you make are going to inevitably affect something or someone in ways that you can’t predict and haven’t planned for; the more ambitious your plans, the more factors in play, the more potential for unintended, unseen sparks to trigger raging economic wildfires.
Fortunately, there is a solution. In a free market economy – which the Libertarian Party advocates – each individual takes responsibility for their own decisions. They use only the information that is relevant to them, making it a lot easier to apply Hazlitt’s principle to their decision making, to mitigate against risks and reach positive outcomes.
More importantly, they’re not likely to crash the whole economy by selecting the wrong type of milk.
Some people suggest that this is an untenable solution – running your own life is very hard, after all. Simple things can often go drastically wrong. You could end up with a Ferrari, but it’s a lot easier and far more likely that you’ll starve to death instead. Such risk – also known as freedom – is uncivilised. Something must be done!
Maybe they have a point; even one death is tragedy, and it’s tough not to sympathize with human suffering, even that which self-inflicted. Then again, maybe significantly increasing the risk of accidentally starving millions of people to death, a la Maoist China, Soviet Russia, modern Venezuela and more by giving massive power to some self-appointed experts in government isn’t so great either.
But, hey… what do I know?