Central planners the world over disdain the free exchange of goods and services. They believe they can better shape the world around them according to their wishes. This fatal conceit compels them to intervene in destructive ways.
Some central planners, like Fed Chair Jay Powell, think they’re saving the world economy by cranking up the printing press. Others, like AOC, could care less about the economy…so long as they can mediate the redistribution of wealth more to their liking.
The mess wrought by extreme government intervention has been magnified by coronavirus. The central planners took a bad situation and made it dramatically worse. They destroyed the economy so they could ‘build back better.’
First the shutdown was ordered to flatten the curve, resulting in over 33.5 million new claims for unemployment in just seven weeks. Then the big bailouts of big business were rolled out to counteract the breakdown of financial markets. Token checks were also sent out to the broad populace. And that’s just the beginning.
Central planners, no doubt, love this kind of stuff. They find meaning and purpose in it. What’s more, it makes them feel smart…especially when they can use fake models and fake science to support their decrees…
Guided by Garbage
On March 18, British epidemiologist Neil Ferguson and his cohorts at Imperial College in the United Kingdom used scientific models to project 2.2 million deaths in the United States from coronavirus. The central planners took these scientific models as the cornerstone truth and commanded shelter in place and social distancing orders. Yet it was all based on a crock!
For example, in 2009, one of Ferguson’s models predicted 65,000 people could die from the Swine Flu outbreak in the UK. The final figure was below 500. And during the 2001 Foot and Mouth outbreak, Ferguson warned the government that 150,000 people could die. In the end, 200 people died.
Similarly, Ferguson estimated a potential death toll of 200 million people during the 2005 Bird Flu outbreak. The real number was in the low hundreds. What’s going on?
Here, we’ll turn to Charles Babbage, the English polymath credited with inventing the first mechanical computer, to better understand Ferguson’s deal. From his 1864 work, Passages from the Life of a Philosopher:
“On two occasions I have been asked [by members of Parliament], ‘Pray, Mr. Babbage, if you put into the machine the wrong figures, will the right answers come out?’ I am not able rightly to apprehend the kind of confusion of ideas that could provoke such a question.”
In other words, garbage in garbage out (GIGO). By this, computer outputs are only as good as the data that are input. If garbage data is input the resulting outputs are garbage.
“Some of the major assumptions and estimates that are built in the calculations [of Ferguson’s models] seem to be substantially inflated.”
That was the assessment of John Ioannidis, a professor of disease prevention from Stanford University. The point is, the response by central planners to the coronavirus outbreak was guided by garbage. The economy has been wrecked. Moreover, the programs to save the economy will further destabilize it. But why stop now?
For central planners this is their golden opportunity to ‘build back better’…
Beware of Plans to Build Back Better
This week, for example, Nobel laureate Joseph Stiglitz and several other economic interventionists published a paper in the Oxford Review of Economic Policy calling for green stimulus. The paper’s title asks the question, “Will COVID-19 fiscal recovery packages accelerate or retard progress on climate change?
Without government intervention, say the authors, “There are reasons to fear that we will leap from the COVID frying pan into the climate fire.”
The paper includes a survey of 231 central bankers, G20 finance ministers, and top academics from across 53 countries to subjectively assess the economic and climate impact potential of 25 stimulus policy archetypes. One important – unequivocal – conclusion is that the world’s leading central planners are onboard with stimulus that reduces carbon emissions.
The policy archetype of no stimulus and no intervention was not considered, as far as we can tell. But the paper is chock full of colorful exhibits that appear to be a cross between scatter plot charts and dove entrails.
The purpose of the exhibits is to graphically display the various experts’ perceptions of the desirability of various stimulus policies. Is a policy of high positive potential climate impact or high negative potential climate impact? And what is its long-run multiplier?
Like Ferguson’s death models, the study is contrived nonsense. But it’s just the sort of thing the central planners can point to as they flatter their egos and double down with the next wave of fiscal stimulus intervention. Per Cameron Hepburn, lead author:
“The COVID-19-initiated emissions reduction could be short-lived. But this report shows we can choose to build back better, keeping many of the recent improvements we’ve seen in cleaner air, returning nature and reduced greenhouse gas emissions.”
For the central planners, building back better means pumping stimulus into clean energy research and infrastructure, disaster preparedness, and zero-carbon transportation. Alas, for the 33.5 million recently unemployed, there’s no booty in it.
But who cares when Class 8 heavy duty truck orders crashed to a 25 year low in April? Better to keep those diesel burning smoke belchers off the road.
for Economic Prism