Saturday, November 27, 2010

Planning vs Planning

Friedrich Hayek, in his landmark book, "The Road To Serfdom", distinguishes between the type of economic planning which is required to make a capitalist system as efficient and beneficial as possible, and the type of economic planning which is designed to replace a capitalist system altogether.  The first type of planning, which is primarily the design of the framework of laws and regulations within which a capitalist system can function, if done well, is notable for something it does not provide, that being the ability to predict who will succeed, and who will not.  In other words, opportunity is preserved equally for all, with success determined by ability, determination, and circumstance.  The other sort of planning, which is designed to replace capitalism on the basis of providing a more equitable distribution of wealth, or any one of a million other, arbitrary goals, is notable because the success, or lack of success of different economic actors can be predicted.  This, of course, because success, or lack of it, no longer depends on individual effort and ability.  Instead, our lot in life is measured and weighed against the competing claims of every other economic actor, and our fates decided by a planning board, an economic council, or a dictator.  What a depressing thought.

A friend and I have often debated the degree to which the first, or "good" sort of planning can progress before it becomes, de facto, the second sort.  Because surely, the more onerous, punitive, and complex a framework of laws, even if designed to be applied generally, the more likely that the framework itself becomes an instrument that picks winners and losers as ruthlessly and unjustly as the aforementioned planning board or economic council.  It certainly seems to me that we are approaching that situation in the United States today.

Why do we have so many laws such that we have gone far beyond a general framework designed to preserve opportunity for all, and entered the realm of a coercive monstrosity that divides and conquers.  Because of two lines of thinking that often turn out to be misconceptions, or worse, just lies, one, that they are necessary, and two, that they are good.  These misconceptions and lies are in general promoted by those progressives who purport to remedy some injustice, or by those collectivists who, faced with the inability to replace the capitalist system that they hate through direct, democratic means, have resorted to subterfuge instead.  In other words, control and direct indirectly, through onerous, and punitive regulation.

A current example of this type of legislation is the "Paycheck Fairness Act", already passed in the House, thankfully not in the Senate, for President Obama would surely sign the bill.  The reason for this bill, according to its sponsors, is that women earn 77% as much as men, and that this is evidence of discrimination on the basis of sex.  Of course, the bill's sponsors never mention that their 77% number is completely unrefined by any sort of analysis that takes into account the different choices that men and women freely make in the mangement of their individual lives.  Nevertheless, the PFA seeks to remedy this "injustice" by forcing employers to raise women's pay by dramatically reducing their ability to defend what they feel are legitimate pay differences based on merit.  In addition, the PFA is a foot in the door for the application of "comparable worth", which is a term that describes the setting of wages according to an arbitrary theory of value rather than according to market forces.  This is price setting, plain and simple, and it is not something that a few wise men (or women) can do without introducing market distortions that result in the misuse of a nation's scarce resources.  The only injustice in this whole scenario is the PFA itself.  Trial lawyers will feast on the lawsuits that will result, and women, the intended beneficiaries, will likely be harmed because the increased cost of hiring them will reduce the opportunities that are available.

We should have no doubt that legislation of this sort goes far beyond the general framework that is supported by Hayek in his book, and I pray that it remains on the wish list of the collectivists.