Keynes vs. Hayek Round II, The Fight Of The Century.
Mises states, “The issue is always the same: the Government or the market, there is no third solution.” This has been the fight of the century, and will be the fight of the next century. Top down central planning by the state vs, bottom up voluntary cooperation in the market.
Central planning by the State sounds so logical and reasonable if analysed on the surface. Spending creates demand and people will produce to supply this demand. That’s simple and easy to understand on the surface, but a deeper analysis reveals that the structure of production is a very complex process. This complex structure of production was created by the spontaneous ordering processes in the free market not through central planning by Government. Intervention by Government into this complex process creates unintended consequences. This starts the process of Government continually trying to correct for the results of the previous interventions. Unfortunately for the planners, market forces are continually correcting and reacting to every decision made by individuals cooperating inside of it. When Government intervenes with cooperating individuals, the corrective forces of the market don’t stop, they continue to work, and because individuals in the market react to the intervention in a way not foreseen by omniscient Government, two different correcting forces are put into play at the same time, each trying to correct the results of the other. The proverbial dog is continually chasing his tale, putting the economy in a state of economic gridlock. As long as there is any semblance of a free market, this circling will continue, unless Government stops intervening, whether through spending, regulating, taxing, borrowing or counterfeiting.
This video shows who’s idea’s have won over the “intellectual” class in spite of the overwhelming logic and evidence that proves these idea’s wrong. We all have to understand the economic realities of central planning and voluntary cooperation, in order to pressure the Government planners, through the political process, to give up on these incorrect ideas, or we will be in a continual state of economic gridlock.
For some heavy lifting read F. A. Hayek’s lecture, “The Pretence of Knowledge”, given on the occasion of receiving the Nobel Prize in economics in 1974.