Misconceptions of Economic Forces

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Free-market economists, whether Austrian, Chicagoan, or otherwise, have repeatedly warned of the problems with central planning, the impossibility of economic calculation via command economy, and the dangers of manipulating the economy through legislation.

The mishandling of the coronavirus outbreak through centralized management provided even more evidence of the problems of this methodology. But of course, there are always economists and planners who somehow see the exact opposite. They see each disaster as evidence that centralized management of the economy can work, and that the free-marketeers have been wrong this whole time.

But when sifting through what is left of the economy, this doesn’t seem to be the case. Is the fact that central planners were capable of halting the economy supposed to be taken as a refutation of the free-market worldview? No Austrian or Chicago economist would deny that central planners can certainly try to mess with the economy, and history is proof that central planners can make changes without the whole thing immediately burning to the ground.

When central planners point out that they are capable of shutting down and reopening the economy, the free-marketers don’t deny that this happened, but instead point to the pain and suffering caused by such an act, including the millions of animals that were needlessly killed as just one consequence of lockdowns.

Contrary to the historicists, there are such things as universal economic laws, much as there are laws of physics. A physicist might say to an engineer “you cannot build a bridge while ignoring the laws of physics.” They, of course, do not mean that you cannot literally produce a bridge while not taking certain physical laws into account. They mean that if such a bridge were built, there would be clear negative consequences, and no sane person would attempt to use that bridge without fearing for their safety.

Likewise, economists will not deny that, sure, powerful governments do have the capability to shut down parts of the economy, and then reopen them later. But the consequences of such an act will be terribly damaging, and these consequences are unavoidable. Manipulating the economy in such a dramatic way without unforeseen problems occurring is the impossible task.

Sure, it is possible to take a car driving very fast and bring it to an sudden halt. But it is impossible to do so without injuring anyone inside the car. The damages caused by lockdowns will no doubt be felt for quite some time, and while advocates of the shutdown claim it was worthwhile to save human life, they would never suggest that such planning had any economic benefits.

This is a simple case of just because we can, doesn’t mean we should.

Economists have known for at least five centuries that top-down interference in the economy is generally a bad thing. They never claimed that such acts were impossible, only that such acts were impossible without unforeseen negative consequences. To know that a mainstream economist can look at the outcome of such drastic interference in the economy and see it as positive reinforcement for more central planning is worrying. Even now, we cannot fully understand the results of this interference. The damages will no doubt be felt years from now.

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Nathan A. Kreider is the host of The Conversation, a podcast about ideas and how to spread them. He also publishes a blog and video content, including short book reviews, which can be found on his website nkreider.com. He can be contacted by email via [email protected]

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