Boettke on economic policy

Peter Boettke over at the Austrian Economists blog makes a couple of interesting points in a recent message. With regard to much of the current economic policy debate Boettke writes

The basic lessons of political economy seem to have been lost in much of the current debate. Government cannot be seen as a corrective, but at best should be viewed as a referee. The incentives politicians face are distorted, and the knowledge they have to work with is constitutionally limited, that efforts to tinker with the economy let alone guide the economy are destined to fall short of the goal and in most cases in fact make matters worse. From Bastiat to Friedman the problem of crowding out of private investment by public investment has been noted as a source of trouble. And perhaps nowhere has the problem been stated so clearly as in Adam Smith when he wrote: "The statesmen, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would no-where be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it." (1776, Bk IV, p. 478).

He goes on the point out, correctly, that

Yet in our current political context we are once again looking for government to be an active player in the economy, and for the economists to be saviors with their grand plans. But it was precisely government policies that created the problems we confront today (and got us into the mess in the 1970s, and the mess of the 1930s before that).

Boettke then makes a very relevant point about the fate of the economist giving (good) advice to government.

As F. A. Hayek put it once, the economist is called upon to offer policy advice more often than any other social science, yet suffers the fate that once his advice is given to have it discounted as soon as it is uttered. Obviously Hayek had a certain type of economists in mind when he made that statement because some individual who call themselves "economists" are in fact listened to everyday. What Hayek meant is the economist who understandings incentives, realizes the limitations of knowledge, and focuses his analysis on structures and constraints. It is that economist -- the one worthy of the name -- that places parameters on people's utopias, and in so doing is actually viewed as impolite and impractical in the context of politics. But getting excluded from a conversation that is corrupted by the lust for power is not a sin --- if you speak truth to power and get kicked out you have done your job, if you speak nonsense and you get kicked out, then you have failed to do your job and you have discredited your discipline.

He then gets to the bottom line.

But the bottom line, we will never get out of this current economic downturn until the government gets out of the way and the creative powers of the market society are unleashed to correct the previous malinvestments caused by government distortions, and to adjust to changing circumstances to coordinate the creative innovations of producers with the demands of consumers to live more enjoyable and comfortable lives.

Boettke then draws a comparison between where we are today and where we were in the 1970s, and perhaps in the New Zealand context where we were in the early 80s.

Government policy got us into this mess fueled by bad ideas of social justice and public policy, and the incentives within policy making which bias the policies proposed and adopted in a certain direction, and we have to understand that government policy will not get us out of this mess --- especially if the bad ideas on social justice and public policy persist in our culture. We are in a situation similar to the mid- to late- 1970s again, but this time we don't have a Milton Friedman producing FREE TO CHOOSE, and we don't have a political leader like Reagan who employed Friedman's rhetoric (if not his actually proposed solutions) within the political debate.

In UK you could add leaders like Margaret Thatcher and for New Zealand Roger Douglas et al. Boettke then adds

Pivotal times require pivotal people. Think of the economists in the 1970s that could articulate the case for limited government: Friedman and Hayek lead the list, but also Buchanan and Stigler, Becker and Coase, Alchian and Demsetz, Meltzer and Brunner, etc. Who would be on your list today that has achieved the same scientific status as these men, but also are articulate spokesmen for their position on limited government?

While Boettke is right we need scholars of the standing of these people to argue the case for limited government, more importantly we need everybody to so argue. If we really want change, then it is up to all of us to back that change. We must all be willing to fight for a different policy direction.

But this does raise the question, Who among scholars in the New Zealand is likely to make the case for limited government, especially given that both major, and most minor, political parties are all for ever increasing government interference?