Friday, December 21, 2012

Economic Wack-A-Mole

Cave wrote an interesting article decrying the progression of economists from the failed "scientific socialism" planning to the new, improved soon-to-be-failed "scientific capitalism" planning as they try to decrease risk in the economy. (What Hayek called the "fatal conceit.") He includes one line from Popper: Karl Popper explained: "In an economic system, if the goal of the authorities is to reduce some particular risks, then the sum of all these suppressed risks will reappear one day through a massive increase in the systemic risk and this will happen because the future is unknowable". So the sum of risks is relatively constant and one can take them in small, digestible doses or in one, large, indigestible block.
Note that the effort is made to manipulate what cannot be manipulated. The recognition of our limits is not fatalistic, it is realistic. And the efforts of economists and politicians to avert the consequences of mistakes is little more than those of a witch doctor sacrificing a virgin to sedate the volcano.

Sometimes it seems to work. 

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