A Message for Economists Who Have Moved to the Dark Side

Robert Higgs writes:

It’s hardly a news flash that many people who are widely regarded as lions of the pro-market side have gone over to the dark side in recent months...

Obamistas’ motives are purely political, as befits a pack of office holders and their lackeys, so it is pointless to indict them – a rattlesnake is not to be blamed if it strikes, because its nature impels it to do so. But why are well-known free-market economists going along with this nonsense?...

Anyone who expects markets to restore a disturbed equilibrium instantaneously will be disappointed. People cannot discover the relevant changes, confirm and assess them, consider alternative arrangements of their affairs, and carry out those changes in an instant. The competent economist appreciates the necessity of patience in evaluating the market’s operation. Simply because the market does not appear to have reconfigured itself fully soon after a shock, we have no warrant to conclude that "the market doesn’t work anymore" or that "the market doesn’t work the way it used to." Such statements manifest an economic crackpot, and economists who talk this way discredit their professional competence...

...the new New Deal idea of the Obama regime’s "creating jobs" by bankrolling infrastructure "investments" might as well come with a written guarantee attached that it will generate nothing but resource waste and the pork-barrel distribution of vast amounts of taxpayer money to satisfy the appetites of congressmen, local politicians, construction unions, and real-estate interests. Even if a road, a bridge, or a sewer system ultimately comes forth as a visible result, the unseen alternatives forgone are almost certain to have greater value for those from whom the grasping hand of the federal state has stripped the wherewithal to pay for the projects. Free-market analysts ought to understand such matters, which are scarcely arcane, and anyone who has watched the government’s responses to previous recessions, from 1929 to the present, ought to understand the present situation without remedial instruction from me...

Yes, unemployment has risen, as it always does during a recession. But the rate of unemployment last month was only 6.7 percent. During the Great Depression, the unemployment rate often exceeded 20 percent, and many workers who had jobs in those days had only part-time employment even when they wanted to work full-time. So, despite the numerous Chicken Littles running about excitedly, the present situation does not bear comparison with the mass unemployment of the 1930s; nor does the ample safety net that now stretches beneath the unemployed – a refuge that did not exist in anything like its present setup during that difficult decade...

The greatest mistake made in previous occasions of this sort has been to add new government burdens to the ones that helped to bring on the troubles in the first place; hence the ratchet effect in the growth of government. If only we had the wisdom to recognize a crisis as the most compelling occasion for getting rid of accumulated government burdens and idiocies, then we could throw the ratchet effect into reverse, with highly beneficial long-run consequences, including greater economic liberty and faster economic growth.