Organizations and Markets

Nirvana Fallacy Alert, #2,535 in a Series

1 December 2009 at 9:49 am Peter G. Klein Leave a comment

| Peter Klein |

Another mistake in John Cassidy’s ditty on externalities is the claim that Pigou “was reacting against laissez faire — the hands-off approach to policy that free market economists, from Adam Smith onwards, had recommended. Such thinkers had tended to view the market economy as a perfectly balanced, self-regulating machine.” Forget that the British Classicals, Adam Smith in particular, were far from “hands-off” types. Note instead that Cassidy provides no textual evidence of unnamed “free-market economists” viewing the market system as a “perfectly balanced, self-regulating machine.” How could he, when no sensible economist ever wrote or thought such a thing? The free-market economists — actually, virtually all sound economists — have maintained that the market economy works remarkably well, given the limits of human knowledge, our devious character, the brutality of nature, and so on. Paris gets fed, as Bastiat noted, and that is a miracle. Government intervention into markets inevitably makes things worse, the economists argued, not because the market system is “perfect,” whatever that means, but because men are fallible, and giving coercive power to fallible men is — to borrow P. J. O’Rourke’s metaphor — like giving whiskey and car keys to teenage boys. Cassidy’s caricature shows how little he understands what free-market economics is actually all about.

Entry filed under: - Klein -, Classical Liberalism, Myths and Realities.