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Wednesday, March 3, 2010

Statistics: Friend of the Interventionist, Enemy of Liberty

In the Clichés of Socialism number 57, Murray Rothbard makes the case against government statistics. Of course not all statistics are bad, but Rothbard argues that without government collected data significantly fewer statistics would be collected in a free society.

For advocates of liberty, the problem, beyond the wasted costs of collecting the data, is how critical data collection is for interventionist policies. Essentially the statistics are the only means of obtaining the knowledge necessary to “plan” and “reform”.

Businessmen and consumers, on the other hand, receive the information to achieve their plans through the market. This is possible because prices, which contain the relevant information needed by agents, act as signals. Given this, it’s no wonder Rothbard declares, “statistics, so vital to statism, its namesake, is also the state’s Achilles’ heel.”

This article is particularly interesting given the intellectual context within which the article was written. The majority of scholars at the time thought socialism was both morally and economically superior to capitalism. This is what Khruschev meant when he declared, “We will bury you!

Intellectually, in the 50s and 60s, the failures of socialism were not attributed to the inherent difficulties of socialist planning but rather to institutional problems. The Socialist calculation debates, which took place in the first half of the century, were seen as over and many of the lessons were incorporated into a more sophisticated theory of planning. Mises and Hayek had lost but not without their ideas helping to fix the problems inherent to planning. Pure socialism was indeed impossible, as Mises showed, and was thus replaced by market socialist theories from economists like Abba Lerner (ironically a student of Hayek at LSE). To overly simplify, the market socialist systems attempted to mimic the market and to do so it needs statistics!

Still, in this article Rothbard goes against this intellectual grain and assumes that Mises and Hayek were right all along (which history now seems to agree with). Thus, in order to stop the planners, Rothbard proposes, the libertarian would do best to eliminate government statistics. While the context of our current times is certainly different, Rothbard’s point is no less important.

Download Clichés of Socialism number 57 here.

  • Nicholas Snow is a Visiting Assistant Professor at Kenyon College in the Department of Economics, and previously a Senior Lecturer at The Ohio State University Economics Department. His research focuses on the political economy of prohibition.