Central Planning Fails Just As Much When Conservatives Are the Planners

It’s a popular narrative on the Left at the moment to say that members of the Right have an unhealthy disdain for “experts.” Washington Post columnist Catherine Rampell is a notable critic on the matter, but the view here is that her criticism misses the mark. Reasonable members of the Right don’t loathe experts as much as they dislike central control.

Reducing all of this to the absurd, let’s imagine for fun that the smartest individual in the United States is none other than our President, Joe Biden. In a nation populated by geniuses, Biden sitting at the top in terms of intelligence wouldn’t alter a simple truth frequently ignored by the expert reverent: there’s arguably not a fraction yet conceived that could properly convey how small Biden’s knowledge would be relative to the collective knowledge of the American people.

All of which hopefully explains why markets always and everywhere beat central planning. It’s not that there aren’t smart and realistically brilliant people in high positions of government. There certainly are. But the combined knowledge of the revolting masses is much greater.

That’s why readers reasonably have a fool-proof way of detecting trouble or “crisis” on the way. It’s when those in power promise a crisis if they’re not allowed to do something in response. “Do something” is another way of saying “central planning by experts” will substitute for freedom. When government intervenes, limited knowledge pushes aside abundant knowledge, with predictable results. The “crisis” is always and everywhere born of the taking of freedom. It’s the intervention.

No doubt there are conservatives somewhere in the world reading what’s just been written, and agreeing. After all, Friedrich Hayek’s Road to Serfdom was nothing if not a call for freedom. Markets are wise because they’re a consequence of infinite decisions made every millisecond by thousands, millions, and billions of people. The problem is that conservatives are increasingly the planners.

Take a recent letter-to-the-editor published in the Wall Street Journal by conservative academic (Florida Atlantic University) William Luther. While correct in his assertion that it’s not the Federal Reserve’s job to “’stimulate growth,’” by letter’s end Luther proceeds to contradict himself. He writes that “Rather than stimulate growth, the Fed should discourage overproduction and underproduction.” Really? How? And just what is “overproduction”? If we ignore a brutal summer in terms of heat that no doubt has Americans yearning for exponentially more air conditioners and air conditioning (yes, “overproduction”), the conceit in Luther’s alleged analysis is astounding. They used to plan production in the old Soviet Union (“Five Year Plans,” or something like that), and the planning was an abject failure. That it was is a waste of words. See above.

Luther is clear that in his modeling of the world, “growth can be too high,” so he’s once again calling for the Fed to manage it, for it to be “most useful for stabilizing the demand side,” so that the economy seemingly doesn’t get too hot or cold. Sorry, but an economy is just a collection of individuals. They can’t be too successful or too unsuccessful. Based on how Luther sees the world, one guesses he thinks the Tampa Bay coaches should remove Tom Brady from the lineup if he throws three first quarter touchdowns, lest he throws a fourth in the 2^nd quarter.

Stranger still is that Luther clearly is of the view that the Fed is the proverbial pipe through which credit flows. The professor seems to think the Fed permits prosperity, at which point it should once again “discourage overproduction and underproduction.” Actually, credit is produced globally. It’s resources, it’s people, it’s not the central banks. In fairness, Luther isn’t the only conservative economist to so thoroughly embrace central planning from the Commanding Heights.

Take Texas Tech professor Alexander Salter, a contributor of commentary alongside Luther to the historically free market American Institute for Economic Research. Salter believes that “The best we can do is keep aggregate demand on a steady path.” Ok, stop right there. Demand isn’t something that can be planned or made “steady” simply because it’s a consequence of supply, or production. Salter’s analysis, like that of Luther, is that the Five Year Plans of the 20^th century didn’t fail because central planning didn’t work, but because the wrong central planners were in control.

In Salter’s case, he believes “Monetary policy works better than fiscal policy” when it comes to keeping “aggregate demand on a steady path.” And while he acknowledges the fallibility of experts in their attempts to do just that, he seems to believe that the failure wasn’t one of central planning, but that he wasn’t the planner. If Salter were in control he would improve outcomes by putting the Fed “on autopilot,” after which the central bank “should have a single, well-specified mandate that forces it to hit an income variable, such as a price level target or a nominal spending target.” You read that right: the prices that organize a market economy should be planned by Salter. Same with income. Oh dear. No, that’s not serious. Worse, it’s dangerous.

Rather than promoting economic freedom, and the obvious truth that money and credit are natural functions of a free marketplace, Luther and Salter seemingly want to take us back to an ugly past. In Salter’s case, his ideology is “market monetarist.” Oh well, when one needs to claim a market orientation there’s usually a “doth protest too much” quality to it, and there surely is here. Salter wants markets so long as he’s the one organizing them. See above again.

Central planning doesn’t fail because of the planners, but because the experts can never, ever measure up to the genius of the market’s combined knowledge. In other words, central planning fails just as miserably when conservatives are the planners.