It is on the subject of markets that George Will is genius.
Markets, Not Economists, Will Help the Economy
"In recent years, in normal conditions, the economy has 'lost' tens of millions of jobs through capitalism's 'creative destruction' (Joseph Schumpeter's phrase). It also has created a few million more than that, which is why the destruction is creative. Investor's Business Daily reports:
'Since Eisenhower's first term, the economy has created an average of 1.5 million new jobs each year. Since Reagan's first term, the average has been about 2.5 million a year. And Reagan, who inherited an economy as bad if not worse than the current one, saw 6.3 million new jobs created four years after he entered the White House.'
Because the economy's job-creation is not quite as predictable as a solar eclipse, Obama, by promising 2.5 million jobs by 2011, is a bit more audacious than was Mark Twain's Connecticut Yankee, who astonished King Arthur's court by commanding an eclipse that he knew was due. Still, because scores of millions of today's jobs will exist two years from now, who will be able to dispute a presidential claim that administration policies 'saved' some portion of them?
If you must forecast tomorrow's weather, you will be tolerably accurate more often than not if you say it will be sort of like today's. In normal times, the rule for forecasting next year's economy is similar. The problem is that economic forecasts matter most in abnormal times, such as these. The question is: How abnormal are these times?
A snapshot of a moving target is of limited use, but: Sales the day after Thanksgiving were 3 percent higher than last year. Over the weekend, 172 million people, shopping in stores and online, spent an average of $372.57, a 7.2 percent increase over a year ago, when 147 million shoppers spent $347.55 per person. Is this evidence that the recent deleveraging of indebted households has breathed fresh life into personal consumption, which normally is 70 percent of economic activity? Is it evidence of underestimated strength of an economy in which more than 93 percent of those who want to work are employed, and more than 93 percent of mortgages are being paid on time? Is it evidence that Washington's jaw-dropping interventions with hundreds of billions of dollars are having their intended psychotherapeutic effects? How much is it evidence of the decline of the price of a gallon of regular gasoline from $4.10 in July to $1.81 today? Over a year, every 1 cent decline is a $1.5 billion saving to consumers.
Whatever else historians will say about Washington's response to today's crisis, they are not apt to say the government did too little. It certainly has not suffered the fate of Buridan's ass, the animal in a philosophic puzzle who, placed equidistant from two piles of hay, starved to death from indecision. Some Washingtonians can remember when the federal government first had a budget of $100 billion (1962); this year's decisiveness might contribute to a deficit next year of $1 trillion.
In his wise book 'Capitalism, Democracy & Ralph's Pretty Good Grocery,' John Mueller, an Ohio State political scientist, notes that John Maynard Keynes' central theme, according to his biographer Robert Skidelsky, was that 'the state is wise and the market is stupid.' Mueller continues: 'Working from that sort of perspective, India's top economists for a generation supported policies of regulation and central control that failed abysmally -- leading one of them to lament recently, 'India's misfortune was to have brilliant economists.'
Many of them were educated in Britain, by Keynes' followers. In America today, everyone agrees that the president-elect's economic team is composed of brilliant economists."
Please read the entire piece. There is more brilliance where that came from.
I know it is hard to believe. But letting the markets do their magic is exactly what the doctor ordered, right now. What this period should demonstrate to people with their eyes open is that, truth be told, folks in government generally do not have the foggiest clue what to do about an economic downturn. And, except in clear emergencies - like, say, 25% unemployment and when they can actually do some good - they should, generally, let people who know what they are doing better resolve problems in the market.
One of the more important reasons we need to make a transition to a free for-profit and non-profit market economy is because of the propensity of those who are sure that only their advice will fix things for everyone - and then only when, good or bad, their ideas are enforced on a population - to never own up when their solutions fail. And to manipulate the political conversation until they get the action they want, even when it is ineffective or makes things worse.
What this period should demonstrate to Americans, I hope, is that their instincts that government handles economic matters poorly - as well as many other matters outside of their core responsibilities that no other institution can manage - are good ones.
There are good reasons to be skeptical of power and people with power to solve your problems for you.
The best one is that usually they cannot.
