Is The Economy; Growing, Shrinking, Or Exactly Where It Should Be?
Is the economy growing, or shrinking? Looking for answers to this question by listening to political rhetoric won’t help you find the answer. Politicians will always state the opposite of what their opponents assert about the economy, and will propagandize economic data in an attempt to prove these assertions. Like a pawn on a chess board, the economy will be sacrificed at the expense of winning a political power game. Politicians preface comments about the economy by stating; “economists say” or “economists agree”, in order to prove their political position related to the economy.
These “economic experts”, cited by politicians, either work for the Fed, the Congressional Budget Office, the R and D parties, think tanks, or write op-eds for the NY Times. These “experts” are always talking in terms of an economy improving, growing, or healthy, on the one hand or getting worse, shrinking, or weak on the other. We should be weary about these “experts” pronouncements, because the question isn’t, is the economy growing or shrinking, the real question is, how can anyone have enough knowledge to know where the economy should be at any particular moment?
WHAT IS AN ECONOMY
The simple answer to the question, where should the economy be, is very simple: exactly where it is. To understand this we first have to know what an economy is. An economy is what results when each individual makes decisions on what to produce, consume, save, or exchange. The economy is never stationary it is constantly changing, because what each individual values related to production, consumption, saving, and exchange, is constantly changing. Economic forces are constantly in play adjusting the economy to these new changes based on what individuals value. The economy can never be measured at one particular point in time. The economic data that the experts look at is essentially an inaccurate report about what has happened in the past. This economic data is the placing of a numerical total on individual economic activity, but it says nothing about the individual activity. It’s like trying to understand a three-dimensional world by only using length and width. How can you know what a sphere is, if the only thing you understand is a circle? Think if you had to make decisions about the D-Day invasion if all you received was information on its progress every ten hours. You would make very different decisions than if you knew in real-time what was happening. Now think if you had to make decisions about D-Day with inaccurate information that is transmitted every ten hours. Your chances of making a good decision are nearly impossible. Trying to make decisions about the economy is much more difficult because there are many more constantly changing variables.
CENTRAL PLANNERS ARROGANCE
All these “experts”, whether they’re liberal or conservative, or whether they’re for central planning or free markets, think their particular policies can produce a growing economy. These “experts” aren’t just arrogant enough to think they know best how much the economy should be growing or contracting, they also think their policies can make it happen. They think that the decisions of hundreds of millions of people on what to produce, consume, save, and exchange, should be ignored and replaced by their decisions on what they value. Does more knowledge exist about what should be produced, consumed, saved, and exchanged in the millions of decisions made daily by millions of individuals, or does more knowledge exist in the decisions made by “experts” after they analyze false ex post facto data about these millions of decisions?
In a free market economy the economy is at any moment exactly where it should be. Whether it is growing of shrinking doesn’t matter because it reflects what millions of people value based on every decision they make. When “experts” intervene in the economy through regulations, taxes, electronically printed counterfeit money, etc, these interventions are factored into the process individuals use to decide what to produce, consume, save and exchange. Even with all of these interventions the economy is exactly where it should be at any given moment. It should be no surprise that interventionist policies, by politicians and bureaucrats, can’t produce the outcomes these planners had hoped for, they were doomed from the start. Not only because the knowledge they receive is useless, it is also late. But instead of repealing their policies, central planners try to fix the outcome brought about by their previous interventions, by proscribing new interventions. They are trying to cure the symptom instead of the problem.
The only way these interventions have a chance of working is if they were made by a totalitarian regime. But even in a totalitarian regime, individuals still have a choice on what they will produce, consume, save, and exchange. Even though the Soviet Union had all of the power to enforce its edicts, they couldn’t make central planning work. The Soviet Union’s economy, at any given time, was exactly where it should have been, even at the point when it collapsed. So don’t vote for politicians who want to steer the decisions of individuals. Allow individuals the freedom to make unhampered decisions about what they produce, consume, save, and exchange, even if you don’t like the outcome of these decisions. The result will be the optimum amount of satisfied individuals that can possibly be achieved in a world ruled by scarcity and subjective value.
Related Article – Central Planners Don’t See The Consequences Of Their Actions. Or Do They? at austrianaddict.com.
Related Article – A Look Over The Horizon At What Lies Ahead If We Continue Down The Central Planning Road. at austrianaddict.com.
Related Article – Spontaneous Order Utilizes More Knowledge Than Central Planning Could Ever Hope To Utilize, at austrianaddict.com.
Related Article – Spontaneous Order = Free Market Economy, at austrianaddict.com.