#8 – The Economy Needs More Planning–Central Planning, That Is

The Foundation for Economic Education (FEE) is proud to partner with Young America’s Foundation (YAF) to produce “Clichés of Progressivism,” a series of insightful commentaries covering topics of free enterprise, income inequality, and limited government.

Our society is inundated with half-truths and misconceptions about the economy in general and free enterprise in particular. The “Clichés of Progressivism” series is meant to equip students with the arguments necessary to inform debate and correct the record where bias and errors abound.

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See the index of the published chapters here.

#8 – The Economy Needs More Planning — Central Planning, That Is

Thanksgiving is just one day each year.  But because we have so much to be thankful for, maybe it ought to be every day.

G. K. Chesterton once said, “I would maintain that thanks are the highest form of thought; and that gratitude is happiness doubled by wonder.”

Think about that, especially Chesterton’s use of the word “wonder.” It means “awe” or “amazement.” The least thankful people tend to be those who are rarely awed or amazed, in spite of the extraordinary beauty, gifts, and achievements that envelope us.

A shortage of “wonder” is a source of considerable error and unhappiness in the world. What should astound us all, some take for granted or even expect as entitlements. Of those who believe more government is the answer to almost everything, some days I think they don’t even notice the endless wonders that result from things other than the political power they worship.

We’re moved by great music, sometimes to tears. We enjoy an endless stream of labor-saving, life-enriching inventions. We’re surrounded by abundance in markets for everything from food to shoes to books. We travel in hours to distances that required a month of discomfort from our recent ancestors.

In America, life expectancy at age 60 is up by about eight years since 1900, while life expectancy at birth has increased by an incredible 30 years. The top three causes of death in 1900 were pneumonia, tuberculosis, and diarrhea. Today, we live healthier lives and long enough to die mainly from illnesses (like heart disease and cancer) that are degenerative, aging-related problems.

Technology, communications, and transportation progressed so much in the last century that hardly a library in the world could document the stunning accomplishments. I marvel that I can call a friend in China from my car or find the nearest coffee shop with an “app” on my iPhone. I’m amazed every time I take a coast-to-coast flight, while the unhappy guy next to me complains that the flight attendant doesn’t have any ketchup for his omelet.

None of these things that should inspire wonderment were inevitable, automatic, or guaranteed. Almost all of them come our way by incentive, self-interest, and the profit motive — from people who gift their creativity to us not because they are ordered to, but because of the reward and sense of accomplishment they derive when they do. Some see this and are astonished and grateful, happy, and inspired. Others see it and are envious and unappreciative, angry, and demanding. Still others hardly notice, and busy themselves trying to micromanage the world according to their own grand designs.

My senses are always heightened when I’m outdoors, at least in terms of noticing nature. Plants, animals, the stars — all that “stuff” fascinates me. I want to know what this weed is called, where that bird is headed and why, and what the name of that star is. While walking my dogs recently, one natural wonder after another accosted me — fragrant honeysuckle in full bloom on a gorgeous Georgia morning, followed by a stunning spray of roses in a neighbor’s yard, and upon returning to my home, the intricate, colorful clematis and braided hibiscus I planted just weeks ago. I am in constant, obsessive awe of a world so far beyond my comprehension — and so remote from any mortal’s ability to duplicate or centrally plan.

As an economist, I’m inevitably drawn to the economic implications of these observations. No economist ever said it as well as F.A. Hayek: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” In his memorable Nobel Prize acceptance speech delivered 40 years ago this fall, Hayek illustrated the point brilliantly:

“If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that … he cannot acquire the full knowledge which would make mastery of the events possible. He will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants.”

The central planner would undoubtedly note that like a perfectly shaped bonsai tree or rose bush, some humans need a good pruning (and that very same central planner would probably be the first in line to do it, enjoying every minute of it). You can take a bonsai tree or a rose bush and cut it back or tie it up with good results. But try doing something comparable to your fellow citizens and you just might find they’ll never leaf or bloom again.

Admittedly, the human to natural world analogy is fraught with limitations. I intend it only to provoke the reader to think and take it as far as it holds. In the process, it will be useful to remember that humans by their nature are not robots. We’re not so easily planned for as a programmer programs a machine. When we’re children, parents are our central planners, but the point of adulthood is that, at some point, parents should leave us alone. We tend to go further when the environment allows each of us the freedom to plan for ourselves. Amazing things happen when we do.

Leonard E. Read, FEE’s founder, wrote a classic essay (“I, Pencil”) in 1958 that explains an exquisite fact: No one person in the world knows how to make a simple pencil, yet pencils and far more complicated things are produced by the boatload every day. (You can read it here). That should be a humbling thought if you think you can somehow plan an economy for millions of people.

The more one allows the world’s wonders to witness to him, the less he’ll want to play God with other people’s lives or with the economy that their trillions of individual decisions create.

One more point about “planning.” The question is never whether there will be planning but rather, as wise observers of human society have pointed out, whether the plans of some individuals with little power are displaced by those who have more power. “The more the State plans,” wrote Hayek, “the more difficult planning becomes for the individual.”

The Progressive intellectuals and their followers are in awe of what they think they might accomplish through the use of government power. They might benefit if they stopped to smell the roses. Like the rest of the natural world, what real life in a free environment actually accomplishes is much more awesome.

Summary

• Consider the wonders all around you. Perhaps far more than you ever imagined are the result not of some top-down, central plan imposed by wise schemers in government but rather, of the dreams and plans of individuals and their personal initiative.
• Central planning as an economic framework is rooted in what Hayek would call “a pretense to knowledge.” No group of people, no matter how much government power they possess, can possibly know more than an infinitesimal fraction of the knowledge they would have to possess to plan an economy.
• For further information, see:

"Nature Versus the Central Planners" by Robert A. Peterson

"Consumer Information and the Calculation Debate" by E.C. Pasour

"Why Socialism Failed" by Mark J. Perry