Economic Miracle

The economy has over a billion elements that work together in harmony. Can the Congress possibly control all of these? More importantly, is it wise to even attempt it?
Walter-williams

The idea that even the brightest person or group of bright people, much less the U.S. Congress, can wisely manage an economy has to be the height of arrogance and conceit.

Why? It is impossible for anyone to possess the knowledge that would be necessary for such an undertaking.

At the risk of boring you, let’s go through a small example that proves such knowledge is impossible.

Imagine you are trying to understand a system consisting of six elements. That means there would be 30, or n(n-1), possible relationships between these elements.

Now suppose each element can be characterized by being either on or off. That means the number of possible relationships among those elements grows to the number 2 raised to the 30th power; that’s well over a billion possible relationships among those six elements.

Our economic system consists of billions of different elements that include members of our population, businesses, schools, parcels of land and homes. A list of possible relationships defies imagination and even more so if we include international relationships.

Miraculously, there is a tendency for all of these relationships to operate smoothly without congressional meddling. Let’s think about it.

The average well-stocked supermarket carries over 60,000 different items. Because those items are so routinely available to us, the fact that it is a near miracle goes unnoticed and unappreciated.

Take just one of those items — canned tuna. Pretend that Congress appoints you tuna czar; that’s not totally out of the picture in light of the fact that Congress has recently proposed a car czar for our auto industry.

My question to you as tuna czar is: Can you identify and tell us how to organize all of the inputs necessary to get tuna out of the sea and into a supermarket? The most obvious inputs are fishermen, ships, nets, canning factories and trucks. But how do you organize the inputs necessary to build a ship, to provide the fuel, and what about the compass? The trucks need tires, seats and windshields.

It is not a stretch of the imagination to suggest that millions of inputs and people cooperate with one another to get canned tuna to your supermarket.

But what is the driving force that explains how millions of people manage to cooperate to get 60,000 different items to your supermarket? Most of them don’t give a hoot about you and me, some of them might hate Americans, but they serve us well and they do so voluntarily.

The bottom line motivation for the cooperation is people are in it for themselves; they want more profits, wages, interest and rent, or to use today’s silly talk — people are greedy.

Adam Smith, the father of economics, captured the essence of this wonderful human cooperation when he said, “He (the businessman) generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. ... He intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain.”

Adam Smith continues, “He is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. ... By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.”

And later he adds, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.”

If you have doubts about Adam Smith’s prediction, ask yourself which areas of our lives are we the most satisfied and those with most complaints.

Would they be profit motivated arenas such supermarkets, video or clothing stores, or be nonprofit motivated government-operated arenas such as public schools, postal delivery or motor vehicle registration?

By the way, how many of you would be in favor of Congress running our supermarkets?

Walter E. Williams is a professor of economics at George Mason University in Fairfax, Virginia. He has authored more than 150 publications, including many in scholarly journals, and has frequently given expert testimony before Congressional committees on public policy issues ranging from labor policy to taxation and spending.

15 comments from readers  

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Small
Spectacular explanation of the inefficacy of central planning. Let's throw this bomb everywhere we can!!
Small
I didn't expect to give a five as I started this column. First I don't believe in them, and second the average length of these articles was far less than I had expected to be needed. However I must congratulate Mr. Williams, for a piece that is concise enough for easy reading, yet has enough meat for those who wish to make logical forecasts of upcoming governmental failures. If only you could argue logic with those who would first argue whether logic existed to begin with.
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Mr. Williams, Would you please try to get through to the dummies in the media just what it is that you have just said, and I might add; said so brilliantly ! As usual. Well done !!!

Charles Fuchs
Small
Greetings! That is why socialism does not work....that is why capitalism does work. Self-interest....always out performs massive handouts. Giving more money to people who can't earn it themselves, is a mistake, from a mistake. You are being way to sophiscated with a simple fact. Owning a home is a privilege, not a right. If you can't afford a home the banks should of not given you one in the first place, and the government should not continue this first mistake again. Mistakes repeated is a very old economic fact and still holds true. Thanks!
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Well said, if only our political class would know or understand such clear thinking on our economic system. Alas, Obama is much too arrogant to look for advice from the likes of Professor Williams.
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Well done Prof. Williams, as usual.

So, we think Congress is capable of creating jobs and that a car czar can run the auto industry, both of which directly involve large numbers of people spending an average of many hours a day in the pursuit of their job and career interests. It should be much easier for Congress to take on a task of primary interest to just two people. They would only have to get to know the motivations and values of these two people. Let us allow Congress to demonstrate its wisdom and insight by assigning them to manage a young couples' marriage. The young couple will have no children to complicate matters. Should be a piece of cake compared to managing the auto industry or the creation of millions jobs! Do we a couple who wish to volunteer?

Probably Congress would shower you with tax breaks and low interest mortgages, so you might make out like bandits financially. On the other hand, Congress will tell you what to eat and when you will eat out, how and when to exercise, how much to sleep and when to sleep, where you will live and what job you will take, and, oh yea, when and how you might make love, when you will start having children, and how many children you will have.

Who thinks that Congress could do a good job of managing and controlling their marriage? I think there are few Americans who would think that Congress could do this job better than they can. But, Americans now think even more complex jobs are a piece of cake for Congress.

By the way, I do understand that Congress destroys more jobs than it is capable of creating.
Small
You speak well of this subject. It is difficult, sometimes, to launch into such an anecdote, and receive a blank stare. Before we can establish concepts as this, reason must be held as a value to our audience. Believe it or not I face this from time to time.
Tom H
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Thank you, Walter, for condensing Ayn Rand's economic ideals into a few brilliant paragraphs. Are you listening Barry Hussein Obama & Congress? I doubt it.
Small
Dear, dear Mr. Williams,

Will you accept the position of common-sense czar? THANK YOU for this very important article.
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Excellent. The first question: how to effectively disseminate this simple, logical argument to economically illiterate citizens and students? The second question: is it even possible for rational argument to overcome the personal biasses and short term self-interests of economically illiterate perople?
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... but what does one do and where does one look to escape the on-coming socialism?

If years ago US was the last vestige of Capitalism, where does one emigrate to when it is gone?

My parents and I left Soviet Union in the 70's and I studied economics and finance at UT Austin. I am appalled at the "slogans" of today, especially when they are sold to the public disguised under pretty names such as "Employee Free Choice Act."

While I own my business, I am not uncomfortable with the idea of emigrating again, yet where is that "island" from Atlas Shrugged where all the productive capitalists can go to?
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What can we do to stop the inevitable? I want to know. I want to do my part.
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Everyone reading this article should send it to their three Congressmen and Mr. Obama, except that hypertext sent to them is filtered out to protect their sites from viruses. Would the editors give those of us wanting to send this article permission to copy the article and send it by personal email. That would get around the filters?
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From my early childhood I have always noticed that politicians are the most ignorant and isolated people, totally unaware of popular culture and cut off from the simplest facts of day to day life.

When I saw or read of the things they did, the apparent mistakes they kept on making, I wondered if they were just stupid. Even as a third grader I could grasp the basic facts of economics.

It was later I realized, that under the American system of government, as established by the founders, the government was supposed to perform only a few, limited, routine tasks, which could be safely assigned to relatively incompetent people. People with valuable skills and know-how would be free to pursue important business.

To put this in modern terms, I suspect that Captain Chesley Sullenberger could do an outstanding job as a Senator. But it was far more important to have him behind the controls of that jet when crisis hit and split second decisions were called for. On the other hand, would you hire Ted Kennedy to drive a taxicab?

Unfortunately, the drones and drudges who make up most of our legislatures and bureaucracies are possessed of a certain cunning and a jealous awareness of their own inferiority. Knowing they are incapable of achievement themselves, they take out their envy and ambition on those who are capable of productive endeavor.

Even sadder, the best among us have acquiesced in the takeover of our lives by our intellectual and moral inferiors. Ayn Rand described in great detail a painful, but relatively peaceful means to correct this imbalance. If the United States must endure a time of trouble, let it be the beginning of the restoration of real liberty and the prosperity that can be created when men are free to innovate and produce.
Small
Well stated, I am sharing this article with alot of friends. Why can't common sense win the day instead of political rhetoric. I am having a hard time trying how to behave economically in a socialist state. Hard work is not rewarded in the present climate.
To post comments, please log in first. The Atlasphere is a social networking site for admirers of Ayn Rand's novels, most notably The Fountainhead and Atlas Shrugged. In addition to our online magazine, we offer a member directory and a dating service. If you share our enjoyment of Ayn Rand's novels, please sign up or log in to post comments.