The economist’s main value to society lies in his or her ability to reveal that which in the economy typically remains unseen. This function of the economist is explained most famously by Frédéric Bastiat. But also, of course, this understanding of the economist’s role is implicit in Adam Smith’s mention of the “invisible hand.”
Smith’s An Inquiry Into the Nature and Causes of the Wealth of Nations is a brilliant treatise using the economic way of thinking to pull back
the curtain on economic consequences – good and bad – that are usually
out of the line of sight of people who focus only on what Deirdre
McCloskey calls the economic drama’s “first act.”
It’s easy to see the immediate consequences of economic actions,
whether these actions are those of private parties or of government
officials. No economic understanding or unusual acumen is required. But
seeing beyond immediate consequences is more difficult – or, at least,
such vision doesn’t come naturally to most people. To change the analogy
slightly, it’s the job of the economist to equip people with
intellectual lenses that bring into their line of sight economic
phenomena that would otherwise remain hidden.
Workaday examples of economists revealing that which is unseen
include showing that protectionism which decreases imports artificially
protects lower-productivity jobs in the domestic economy by destroying
higher-productivity jobs in the domestic economy – showing that
minimum-wage legislation worsens employment prospects for the very group
of low-paid workers that such legislation is ostensibly meant to help –
and showing that government officials’ incentives are very often at
odds with the public interest that these officials boast of promoting.
Vast, Undesigned, and Invisible Coordinated Actions
There is, though, a different, if related, realm of the unseen that
competent economists sometimes reveal – although not, in my view, often
enough. This different realm is the modern economy’s unfathomable
complexity.
Leonard Read’s “I, Pencil” is the best-known attempt to convey the vital insight that economies are far more complex than they appear to the naked eye. “I, Pencil” reveals
that behind even an item as seemingly simple as a pencil there teem
untold numbers of specialized workers, from around the world, who are,
without knowing it, cooperating with each other to make possible an
abundance of pencils. Yet judging from the incessant stream of naïve
proposals that issue forth from the commentariat and politicians, very
few people understand just how complex the economy actually is. The
assumption seems to be that the economy is no more complex than are the
words, graphs, and columns of data that are commonly used to describe
it.
This assumption is wildly mistaken. It’s the equivalent of assuming
that anyone can play quarterback in American football at an elite level
merely by observing with the naked eye the play of New Orleans Saints’
star quarterback Drew Brees.
There are indeed a small number of things that can be learned about
quarterbacking by observing an all-time great such as Brees. How many
steps, on average, does he take back from the line of scrimmage after
receiving the snap from center? What kind of physical condition is he
in: lean, or bulked-up muscular? Does Brees throw overhead or
side-armed?
Observing Brees’s play isn’t utterly without value to anyone who
aspires to play well at that position. But the overwhelming majority of
conscious actions, reflexive movements, thoughts, split-second
decisions, knowledge, and ‘feel’ that Brees performs and relies upon to
play quarterback well are unobservable and unmeasurable.
Indeed, Brees himself is unaware of many of the facts that contribute
to his skillful play. For example, he surely knows nothing of the
particular genetic code that determined the precise arrangement of the
muscles and ligaments in his throwing arm – an arrangement that, were it
just slightly different, might prevent him from succeeding as a
quarterback.
Behind what is seen in Brees’s play teem an immeasurable amount of
relevant, factual details all of which contribute to his success yet
none of which is visible to the naked eye, and very little of which is
accessible to third parties even with close diagnoses and high-tech
statistics.
If only implicitly, everyone understands the above-stated reality
about Drew Brees and other successful athletes. No one would propose
that careful observation and measurement of Brees’s play could result in
a written set of rules and instructions that when articulated to a
careful reader thereby enable that reader to play quarterback at any skill level, and much less at the high level routinely achieved by Brees.
And yet an even more ridiculous supposition about the economy is
regularly made by pundits, professors, and politicians. They suppose
that through statistics and theorizing they can learn enough about how
the details of how the economy actually works in order to enable
government to mimic the economy, but in ways that rid it of real or
imagined ‘imperfections.’
The Arrogance of ‘Men of System’
When the likes of Oren Cass, Michael Lind, Daniel McCarthy, Robert
Reich, or Marco Rubio propose industrial policy, they reveal their
unawareness of the indescribable complexity – of the unfathomable
details – of the immeasurable number of local, time-sensitive decisions
that give rise to the surface phenomena that they and the rest of them
see only as “the manufacturing sector,” “ordinary workers’ wages,”
“changes in imports relative to exports,” and on and on and on. Such
“men [and women] of system” – being either ignorant or contemptuous of
the market’s invisible hand – arrogantly presume that that which they
see and can describe using words and numbers is a sufficiently large
proportion of economic reality to enable them to guide the government to
intervene in ways that will result in the happy outcomes that float in
their minds as lovely imaginings.
Such arrogance is fatal.
This reality is inescapable: if we want an economy that makes readily
and steadily available to the masses such goods and services as every
American today takes for granted, an indescribably complex, extensive,
and globe-spanning division of labor guided by market prices is
necessary. The details that enable this economy to work are too many and
too invisible to be conveyed to a central agency charged with
overriding and improving upon the market’s processes.
To the extent, then, that Messrs. Cass, et al., get their wish for industrial policy, they will curse the rest of us with an economy operated according to a childishly simple set of commands. This economy, insofar as it is ‘governed’ by industrial policy, will be reduced to the puny dimensions and limitations of the human mind. We will all, as a result, be made poorer and, also, not incidentally, less free. It’s that simple.
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