fatal conceit

The DOJ’s Antitrust Seers

by Ryan Young on August 31, 2011

in Economy, Features, Regulation, Tech & Telecom

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Today, the Department of Justice sued to stop the proposed AT&T-T-Mobile merger. They claim to know in advance how the merger will affect the mobile market for years to come. It’s an example of F.A. Hayek’s fatal conceit. Of course, most people haven’t read Hayek. So over in the Daily Caller, I use a better known thinker to make the same point:

The philosopher Yogi Berra once said that “It’s tough to make predictions, especially about the future.” Let’s apply his lesson to the proposed $39 billion AT&T-T-Mobile merger…

Competitors are also surprisingly confident in their ability to predict the future. A Sprint spokeswoman said that “Sprint applauds the DOJ for conducting a careful and thorough review and for reaching a just decision … Today’s action will preserve American jobs, strengthen the American economy, and encourage innovation.”

This translates roughly to “We think the merger would make the market more competitive. We were scared that we’d have to work harder to innovate and cut costs to keep our customers happy. Whew.”

Most mergers fail. Nobody knows if a merged AT&T and T-Mobile would offer a better, cheaper product line. The only way to find out is trial and, often, error. The Justice Department’s astounding claim that it knows the merger’s effects in advance is either proof of its superior enlightenment, or else the height of hubris. I’m guessing the latter.

Read the whole thing here.

That G20 Communique

by Iain Murray on April 3, 2009 · 1 comment

in International, Regulation, Trade

Yesterday’s communiqué from the leaders of the G20 – a motley collection of democracies and dictatorships – has some good points, but in general it represents a new version of what economist Friedrich Hayek called “the fatal conceit.” It believes that government has all the answers, and demonstrates that the world’s leading governments recognize few boundaries. As such, not only does the communiqué promise far more than it can deliver – something the voters in G20 democracies should remember – but it may also impede global economic recovery.

The communiqué holds that, “We start from the belief that prosperity is indivisible; that growth, to be sustained, has to be shared” and to “do whatever is necessary.” In clause after clause, this pro-government rather than pro-prosperity declaration embraces new burdens on a limping financial sector in the form of expanded global regulation, and effectively requires that all look toward government before acting in the future. At no point does the communiqué recognize that government action can and does distort market action to the point of significant harm.

The only “growth” being sustained in today’s political environment – and further embraced here – is the open-ended stimulus culture that has already led to an orgy of “sharing” of citizens’ wealth; in a world increasingly at ease with the word “trillion,” we are not suffering from a lack of sharing. The “unprecedented fiscal expansion” is not, as British Prime Minister Gordon Brown said, an injection of new money (except for some sales of gold reserves) but mostly a redistribution of existing taxpayer money to politically-favored recipients.

An effective communiqué would have acknowledged that wealth is not automatic, that it must be created before it can grow and expand – or be shared. Individuals acting together in voluntary enterprise form the foundation of wealth creation and job growth, but that is nowhere articulated here. Leadership would require the G20 representatives to explain precisely how they plan to unravel tax and regulatory barriers to the creation of new wealth, infrastructure, jobs and new financial innovations. Instead, the document stands as yet another open-ended promise for redistribution of a shrinking pie, and aggressive new political dominance of economic life.

This is not to say that the communiqué is wholly bad. Even as they seek to increase the reach of government by a massive expansion of the International Monetary Fund (by its own figures, the IMF budget is now greater than the GDP of all but 16 countries), the G20 leaders had no choice but to recognize the harmful effects of protectionism. The sections lauding free trade are welcome, and stand as a rebuke to Congressional leaders who have introduced protectionist language in recent bills. If there is one glimmer of hope in the G20 communiqué, it is that the vitality of trade may counteract the dead hand of government control.

The Daddy Knows Best Inaugural Address

by Iain Murray on January 20, 2009 · 20 comments

in Energy, Global Warming, International, Nanny State, Politics as Usual, Sanctimony, Stimulus to Nowhere

Fatal conceit alert! Here’s the text of the Inaugural Address, with some comments from your humble servant.

For everywhere we look, there is work to be done. The state of the economy calls for action, bold and swift, and we will act – not only to create new jobs, but to lay a new foundation for growth. We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together. We will restore science to its rightful place, and wield technology’s wonders to raise health care’s quality and lower its cost. We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age. All this we can do. And all this we will do.

Obama already shows that he does not understand infrastructure. The grids – roads and electric grids and so on – only work if the flows – cars and energy – are allowed to flow freely. And flows only work if the grids are sufficient to allow them to flow. This is why liberating or constructing grids is of no help if you restrict the flows, and vice versa. An electric grid designed to meet the demands of the next 30 years will be of no help if we restrict ourselves to the false promise of solar and wind power, which cannot possibly provide more than a tiny fraction of our energy at current – or foreseeable – technology. Similarly, what good is a road network if we restrict our cars to a range of 40 miles? A proper approach to infrastructure liberates both. The best government can do for infrastructure is actually to get out of the way. NEPA reform is essential.

As for “science in its rightful place” – I hope so! Something to inform, not dictate policy.

And “soil” – does that mean nuclear?

Now, there are some who question the scale of our ambitions – who suggest that our system cannot tolerate too many big plans. Their memories are short. For they have forgotten what this country has already done; what free men and women can achieve when imagination is joined to common purpose, and necessity to courage.

What the cynics fail to understand is that the ground has shifted beneath them – that the stale political arguments that have consumed us for so long no longer apply. The question we ask today is not whether our government is too big or too small, but whether it works – whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified. Where the answer is yes, we intend to move forward. Where the answer is no, programs will end. And those of us who manage the public’s dollars will be held to account – to spend wisely, reform bad habits, and do our business in the light of day – because only then can we restore the vital trust between a people and their government.

Ah, a classic obfuscation deployed against the “cynic” – that’d be me, a loyal follower of Diogenes the Dog. “Big plans” are the fatal conceit. “Big works” we could and can handle. There is a big difference. As for the question of the size of government, the most important insight of liberalism is that government that “works” is often still harmful (see J.S. Mill, passim). The tyranny of the majority works for the majority, not the minority. That’s why government has to be limited as a moral imperative, never mind the mountain of economic evidence in favor of limited government.

Nor is the question before us whether the market is a force for good or ill. Its power to generate wealth and expand freedom is unmatched, but this crisis has reminded us that without a watchful eye, the market can spin out of control – and that a nation cannot prosper long when it favors only the prosperous. The success of our economy has always depended not just on the size of our Gross Domestic Product, but on the reach of our prosperity; on our ability to extend opportunity to every willing heart – not out of charity, but because it is the surest route to our common good.

The market has self-limiting devices to prevent it spinning out of control, but too often government regulates against them. It can also be spun out of control by government pushing it too hard in the wrong direction, as happened here, both in the UK and US. I do have to agree with him on opportunity, however. Opportunity is at the base of resiliency and adaptation to circumstance. What we cannot do, on the other hand, is guarantee opportunity, for that by its very nature reduces resiliency. Instead, we must have institutional reform to allow people to make the most of what they have, whether their resources be modest or ample. Property rights, rule of law, the market, many others – all are institutions that allow opportunity and which government has weakened.

…roll back the specter of a warming planet. We will not apologize for our way of life

Interesting juxtaposition. It would be nice if he meant it. Moreover, the use of the word specter is appropriate – a terrifying fantasy that exists only to frighten naive people.

To the people of poor nations, we pledge to work alongside you to make your farms flourish and let clean waters flow; to nourish starved bodies and feed hungry minds. And to those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to suffering outside our borders; nor can we consume the world’s resources without regard to effect. For the world has changed, and we must change with it.

Again, I agree completely with the professed end, but the means by which he hopes to achieve it contradict the end. Artificially restricting energy access on a global basis will keep the poor in poverty and guarantee suffering outside our borders. That is why we need a different approach.

I’ll pass over the cant and the security issues, and end by commenting on a misinterpretation of George Washington:

“Let it be told to the future world…that in the depth of winter, when nothing but hope and virtue could survive…that the city and the country, alarmed at one common danger, came forth to meet [it].”

Notice the subject and the voice. The people came forth voluntarily. they were not commanded by a government or leader. Thomas Paine is asking his compatriots to help, but no government forced it – indeed, that is the point of the request, that it should be said that people did it voluntarily. And respond they did. They sprang forth from their farms and homesteads to see off a tyrant whose list of abuses to their ancient rights and freedoms served as an affront to their heritage and liberty. There was no fatal conceit in the creation of America, rather a reaction against it. [This paragraph has been edited to correct a misrepresentation. See comments.] That is why the misunderstandings, contradictions and wishful thinking embodied in this inaugural address will be no more than a footnote in history.