Across the globe, central planners exhibit a fundamental aversion to the unimpeded exchange of goods and services. They are driven by the belief that they possess the capability to mold the world according to their vision. This misguided confidence often leads them to engage in harmful interventions.
Some central figures, like Federal Reserve Chair Jay Powell, justify their actions by arguing they are rescuing the economy through unchecked monetary printing. Meanwhile, others, such as Alexandria Ocasio-Cortez, seem indifferent to economic stability, focusing instead on redistributing wealth to fit their agenda.
The turmoil caused by excessive government interference has been exacerbated by the coronavirus pandemic. Central planners took an already challenging situation and severely magnified its impact. They dismantled the economy with the intention of ‘building back better.’
Initially, the nationwide lockdown was implemented to “flatten the curve”, leading to over 33.5 million new unemployment claims in just seven weeks. Subsequently, massive bailouts targeted big businesses to address the financial market collapse, accompanied by token relief checks distributed to the general public. And this is merely the beginning.
The allure of intervention clearly captivates central planners. They derive meaning and purpose from such actions, often believing they are demonstrating their intelligence—particularly when they can rely on flawed models and pseudo-scientific data to justify their decisions.
Guided by Faulty Data
On March 18, British epidemiologist Neil Ferguson and his team at Imperial College in the UK utilized scientific models to predict 2.2 million deaths in the United States due to the coronavirus. Central planners embraced these projections as gospel truth, ordering measures like shelter-in-place and social distancing. Yet these predictions were fundamentally flawed!
For instance, in 2009, Ferguson’s model forecasted that 65,000 people might die from the Swine Flu in the UK, yet the actual death toll was fewer than 500. Similarly, during the 2001 Foot and Mouth outbreak, Ferguson projected that 150,000 could die, but the final count was merely 200.
Ferguson also warned of a potential death toll of 200 million during the 2005 Bird Flu outbreak. The true number ended up being in the low hundreds. What is behind these inaccuracies?
To shed light on this, we can turn to Charles Babbage, the English polymath credited with creating the first mechanical computer. In his 1864 work, Passages from the Life of a Philosopher, he noted:
“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.”
Essentially, this illustrates the principle of “garbage in, garbage out” (GIGO). Computer outputs are only as reliable as the data entered; faulty input yields faulty results.
“Some of the major assumptions and estimates built into Ferguson’s models appear to be significantly inflated,” stated John Ioannidis, a Stanford University professor of disease prevention. This reflects the reality that the response of central planners to the pandemic was navigated through unreliable data. The economic damage has been severe, and interventions intended to rectify it may further destabilize the situation. Yet, why not proceed?
For central planners, this represents a golden opportunity to ‘build back better’…
Be Wary of Build Back Better Plans
Recently, for instance, Nobel laureate Joseph Stiglitz and several other advocates of economic intervention released a paper in the Oxford Review of Economic Policy advocating for “green stimulus.” The paper poses the question, “Will COVID-19 fiscal recovery packages accelerate or retard progress on climate change?”
The authors contend that without government intervention, “There are reasons to fear that we will leap from the COVID frying pan into the climate fire.”
The paper comprises a survey of 231 central bankers, finance ministers from the G20, and top academics from 53 countries to evaluate the economic and climate implications of 25 stimulus approaches. A notable conclusion is that many leading central planners support stimulus that aims to reduce carbon emissions.
The approach of no stimulus or intervention seems to have been dismissed. Nevertheless, the paper features numerous colorful graphics akin to a mix of scatter plots and oracle readings.
The illustrations serve to visually communicate experts’ assessments regarding the viability of different stimulus policies. Are these policies likely to have a high positive or negative potential impact on climate? And what are their long-term effects?
Much like Ferguson’s death projections, the study appears to be nonsensical. However, it’s precisely the type of justification central planners seek to affirm their actions and escalate fiscal interventions. Cameron Hepburn, the lead author, summarized:
“The COVID-19-initiated emissions reduction could be short-lived. But this report demonstrates that we can choose to build back better, maintaining many recent improvements in air quality, returning ecosystems, and lowering greenhouse gas emissions.”
For central planners, building back better translates into investing in clean energy innovation, infrastructure capabilities, disaster preparedness, and zero-carbon transport options. Sadly, this does little to assist the 33.5 million people who are now unemployed.
But for these planners, the fact that Class 8 heavy-duty truck orders plummeted to a 25-year low in April hardly matters. Keeping traditional diesel vehicles off the roads seems to take precedence.
In conclusion, while central planners are eager to impose their visions of economic recovery, it is crucial to remain vigilant about the long-term consequences of their actions. The call to ‘build back better’ can often mask underlying problems that require different solutions.
Sincerely,
MN Gordon
for Economic Prism
Return from Beware of Plans to Build Back Better to Economic Prism
