from Kevin Wilson in The National Review, The Mapmaker’s Dilemma
“The economy” is an abstraction, a way of talking about billions and billions of discrete activities and transactions that are too complex and fast-moving to be aggregated into something that politicians can shape through policy. It’s something like that famous mess of mousetraps and ping-pong balls used to illustrate atomic fission in those old educational films, except that the reaction never ends. Economics is a way of trying to describe the economy, which is a very different thing from trying to manage the economy. If there were some set of policies that could be enacted in Washington that would provide everything that politicians and the rest of us would like to see in our economy — strong and steady growth, low unemployment, low and stable inflation, etc. — then they probably would have been enacted by now, regardless of which party or president holds power. There’s not much political upside to economic stagnation for anybody in power. You can assemble a basket of economic factors with great subtlety and complexity — top tax rates, government spending as a share of GDP, monetary policy, you name it — and you will not find much consistent correlation with positive economic outcomes over long stretches of U.S. history: We’ve had good economies with higher tax rates and with lower tax rates, with higher levels of spending and with lower levels of spending, with looser money and with tighter money. Spend enough time looking at the charts and you may conclude that those little islands of economic bliss that have from time to time emerged from the stream of history were not much more than happy accidents. That’s true at the global level, too: Within certain broad limits defined mainly by property rights and honest courts, countries with highly dissimilar economic policies — Singapore vs. Sweden, the United States vs. Germany — will have fairly similar outcomes, with periods of stability and growth punctuated by recession and the occasional crisis.
But still the politicians — and, worse, such intellectual enablers as Paul Krugman — treat the economy as though it were a piece of machinery that only they know how to operate: Do x and enjoy y result. When things go off the rails, it’s “We didn’t know!” But when it’s election time, it’s: “We know! (So give us power!)” The federal government very generally does not know what it is doing or what it should be doing — it does not know what its own agents are up to most of the time, much less how those agents should go about interacting with firms and citizens engaged in all manner of activity about which said agents know approximately nothing. The generalization is triumphant, the details forgotten: “We know what to do about veterans’ health care, but we have no idea what our veterans’ doctors are up to,” or “We know exactly what to do about health care, but we didn’t even read the law we passed to empower us to do it, and so we don’t really know if we’ve legally empowered ourselves to do exactly the things that we know — because we know — are what needs doing.” Etc. The wisdom of Solomon as executed by the Three Stooges.
Our big ideas should be tempered with an understanding of our ignorance and the limitations that ignorance puts on our ability to shape the world in a predictable way through politics. The best and only way that modern societies have come up with for aligning the broad thinking of public policy with the specific facts of economic life — to use the map to understand the territory — is to create simple, general, stable rules at the macro level while individuals and firms operating at the micro level go about the messy and improvisational business of commerce, with any luck producing the robust economic growth that has been eluding us. Entrepreneurs and companies can accommodate many different kinds of public policies if they have the time to adapt to them and the expectation that doing so will be worth the investment — that things will not simply career unpredictably beyond their ability to compensate. As a practical matter, that means that while there would be some value in reducing the tax burden, there would also be some value in having a tax regime that is stable and predictable. If the choice were between a top rate of 33 percent that had to be renegotiated in two years and a top rate of 35 percent that we could expect to endure politically for some time, the stability would probably be worth the two points. All of our reforms should be when possible oriented toward simplicity and generality: straightforward rules that apply to everybody in the same way, with fewer favors, subsidies, carve-outs, exemptions, and industry-specific tax credits, with less economic protection and attempted steering. This might suggest, for instance, that a flat tax on income is the policy to pursue, even though it is almost certainly not the most economically efficient model of taxation or (it will occur to many in Washington) the one that offers the greatest opportunity for political leverage. We should let taxes be taxes rather than try to make them into social or industrial policy. We should let the roads be the roads, not economic-stimulus programs.
Our aim should be a government that does relatively few things but does them relatively well. And the less the federal government does, the easier it is to keep an eye on it. “We didn’t know!” happens when conservatives are in power, too.