Congressmen, Senators, the President, and all the high advisors feel that “we need to do something!” about the current economic crisis. Leave aside that government action is at least 50% the reason we got into this mess (I’d rate it closer to 80%). These guys are succumbing to a major critical-thinking error:
1. We must do something!
2. This (the so-called “stimulus” package) is something.
3. Therefore, we must do this.
Merely that it’s something to do doesn’t mean it’s a good idea.
I’d rather seem them subscribe to this: “Don’t just do something — stand there!” Government doing *nothing* is almost always much better than government doing *anything*.
Hi Paul!
http://techdirt.com/articles/20090208/1349343688.shtml
My favorite post so far on this subject. :)
=C=
I could not agree more.
We are having a similar thing happening here in Ireland.
It does appear though that for small country like ours there is value in backing up the banks so they don’t weaken the country’s financial position internationally. I don’t know how true this is for America.
I agree with the principle of what you say but I don’t think the government is as native as your post suggests.
It’s the way they portray the dumbed down version of there decision to Joe Public that gives that impression.
It depends on the people doing the something. Just like in software development – any software engineering methodology *can* work if the people doing it are really good, and any methodology will fail if the people aren’t doing the right thing.
There are examples of good things coming from bold government action. The New Deal. The GI Bill. The National Voting Rights Act. These changes used government as an instrument, but they were born from right vision of clear-thinking people.
Likewise, terrible things like the Financial Services Modernization Act and the Iraq War were not instigated by government, they were instigated by self-serving and corrupt *people.*
@Bill Karwin –
“New Deal” extended the Depression instead of bringing it to a quicker conclusion.
“GI Bill” is practically a contractual matter, tied directly to services rendered.
“NVRA” — you might have an argument there, but note it was not an economic program.
Comparisons to software engineering are deeply unsuited here. There is simply too much information, too many moving parts, for any “engineered” solution from the top. Latency from government is too high to be useful.
Distributed, dynamically responsive action is the better bet. Government’s role is to make sure the information flows are unrestricted so that individual actors can respond appropriately, not to confuse those information flows by attempting to enforce predetermined notions.
Cool, you have an opinion. Perhaps you could add some arguments in another post.
@false: At least in my opinion, “do nothing” is the default case, the null hypothesis, the basic stand. Arguments in favor of action are positively necessary, *especially* what the particular action is to be, the likelihood of success, what “success” looks like, how to measure that success, and what the likely follow-on effects will be. Those arguments in favor of government action then need to bear scrutiny and be reasonably better than doing nothing for their cost. (Yes, my biases are generally against government action interfering with the free markets it is supposed to enable and uphold, but I’m willing to hear arguments based on “externalities” etc.)
You might be interested in commentator Susan Lee on APM Marketplace, who talks about the “do nothing” solution and discusses its possible merit. Transcript and audio is here:
http://marketplace.publicradio.org/display/web/2009/02/06/pm_no_stimulus/
Paul, if the New Deal prolonged the Great Depression, how do you explain these numbers?
http://www.economics-charts.com/gdp/gdp-1929-2004.html#pct-change
As you can see, GDP was falling from it’s 1929 peak through 1933, the year the New Deal was enacted. The following year sees the downward trend reversed, and the GDP continues to grow until the minor 1937-8 recession, after which it’s up, up, up.
Wikipedia has a similar graph, though it doesn’t have the tabular data:
http://en.wikipedia.org/wiki/File:Gdp20-40.jpg
The hard data does not support your theory that the New Deal prolonged the Great Depression. Please provide some data rather than glib assertions.
I don’t agree with how the bailouts have been handled, as I feel there has been no punishment for the people responsible for trashing our economy. But that’s quite a different thing.
@Ian Eure –
See, for starters, here http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx?RelNum=5409 and here http://online.wsj.com/article/SB123353276749137485.html .
Google for “new deal prolonged great depression” for follow-on arguments and discussion; there’s a lot of credible analysis. This isn’t to say that Keynes was *wrong*, just that application of his ideas is not as easy and forthright as one might wish.
Regarding GDP, I am told that inflation of wages and prices will cause GDP numbers to increase without any “real” effect on productivity. My understanding is that GDP is a tricky and sometimes misleading measurement; as such, the “hard data” you cite is as subject to the “lies, damn lies, and statistics” trope as anything else.
@Bill Karwin — great link, thanks! Can’t believe I missed that Marketplace last week.