What If We’re Wrong?

A technocracy is a style of governance where experts make the rules.  America is very much a technocracy: experts determine what medicine you can take (FDA), what jobs you can hold (licensing boards), what wages you may work for (NLRB, DOL), how you may build your home (permits), what food you may eat (USDA), who you may buy from (tariffs, DOC), and so on.  Like its religious cousin, theocracy, there are heretical questions one mustn’t ask, lest the whole system of faith it is built upon collapses.  In the technocracy, that question is “What if we’re wrong?”

The beginnings of the American technocracy started with the “Progressive Era,” a time where the leading minds in the universities, the government, business, religion, and social circles fancied themselves smart enough to run American lives.  They determined they were educated enough and the American experiment in laissez-faire had failed; America needed to be ruled by them.  Armed with such scientific methods as eugenics, Darwinism, and the like, they set themselves out to save America.  The results were horrific: minorities, immigrants, women, mentally ill or retarded, and all those deemed to be weakening the Anglo-American race were kept out of the workforce and forcibly prevented from reproducing (forced sterilization was a common practice during the Progressive Era).  Legislation like minimum wage was passed to prevent minorities from working. Mixed-race relations were strictly forbidden to prevent “race suicide.”  And these are just some of the crimes committed in the name of technocracy.

We now know eugenics is bunk, but lest we make the mistake of saying “this time it is different” with our 20/20 hindsight, we must remember that these were the leading scientists, economists, and thinkers of the day.  This was not a small movement of kooks, but what was honestly thought to be real science. And many people suffered.

And we see the same today, even in the 21st Century.  For years, FDA and other “food experts” told us eggs were bad.  That’s been changed.  Same with sodium.  And fat.  We were told ethanol would save our environment and car engines; turns out the opposite is true.  Other examples are legion.

A technocracy is just as dangerous to the secular Man as a theocracy is to the immortal Man.  Both rely upon unassailable priests to interpret the Scriptures and who give orders that must be obeyed without question.  Both promise Heaven but deliver Hell.  And both cannot tolerate heretics and freedom of thought.

Make no mistake, the experts and those who support them likely believe themselves to be correct.  They likely do want what is best for humanity.  But they make one simple, but highly flawed, assumption: that they have reached the pinnacle of knowledge.  They all suffer from hubris, which applied to a single man is a sin.  Applied to a whole nation, it is damnation.

A technocrat being wrong can have disastrous consequences.  That is why I advocate for freedom.

Quote of the Day

Today’s Quote of the Day comes from page 73 of my GMU professor Chris Coyne’s 2013 book Doing Bad By Doing Good: Why Humanitarian Action Fails:

Indeed, foreign assistance is often presented in terms of contributing to countrywide economic progress…but in reality the best it can accomplish, owning to the planner’s problem, is to increase predetermined outputs.

Dr Coyne’s point is not limited to just foreign aid.  Indeed, it applies to all top-down economic plans.  By focusing on a predetermined output, all one is guaranteeing is increasing that output, not addressing the underlying problem.  For example, Obamacare’s focus (the predetermined output) was increasing the number of people insured.  By using both a carrot (subsidies) and stick (uninsured fines), it was able to accomplish this goal.  However, Obamacare has not addressed the underlying issues in medical care.  Indeed, by some measures, health care has gotten worse in the US because of Obamacare.

I used Obamacare as an example, but there are many others: education (higher test scores but no change necessarily in the quality of graduates), trade (higher exports but no change necessarily in the quality of living), and so on.  Whenever any kind of growth plan (or “national industrial policy” to use the more modern jargon) is implemented, it is easy to achieve growth in the variable(s) measured.  Achieving true economic growth (as opposed to a series of bubbles) is another thing all together.

Thoughts on Solow and Foreign Aid

One of the major models used in macroeconomics is the Solow-Swan growth model. Skipping a lot of mathematics, the model essentially tells us that economic growth is a function of capital (k), labor (l), and some mysterious A factor that sums up pretty much everything else (education, technological progress, institutions, etc).

When Solow first developed this model, he figured that he’d see economic growth was driven primarily by capital.  However, in testing this model over the years, the conclusion is repeatedly that the A factor is the driving aspect of the model, not labor or capital.

To the extent this is true (the Solow Model has many limitations, even Robert Solow himself recognized this), it would have serious implications for foreign aid.  Given the A factor accounts for everything not capital and labor, and that it appears this A factor is the main driver of economic growth, it would suggest that most foreign aid done by wealthy nations is wrong-headed.  US (and other 1st World Nations) foreign development aid is very capital-focused: building factories, expanding ports, providing machines, that sort of thing.  Given the findings of the Solow model, it would suggest this is the wrong way to handle foreign aid.  In order to be more effective, foreign aid would need to focus on the A factor.  Of course, the problem here is how broad A is.  Other models have tried to break apart A into various components, such as human capital (education), but even those aspects appear to have limited effects.  It’s an interesting question (as well as the question on, given this evidence, why foreign aid is still very capital-focused.  I hope to address this in some hypothetical sense in a future post).

Of course, none of this is to say that there should be no foreign aid.  Just because capital’s influence on the growth rate is limited doesn’t mean it shouldn’t be supplemented.  But it does suggest that the current regime of foreign aid is inefficient.