The Case Against Conscious Government Stimulus
The single greatest fact about capitalist society is that the great bulk of it appears to be the handiwork of a master designer but, in fact, is unplanned and even unimaginable before it becomes real and familiar. Remember this lesson whenever you hear alleged "experts" insisting that only conscious effort by government to "stimulate" demand can save the economy from its current downturn.
It's true that no one can know beforehand the precise path by which a free market travels to escape the downturn. No one can foresee that, say, entrepreneurs in Texas and Ohio will be especially creative at finding ways to produce things that consumers will open their wallets wider to buy -- and, hence, that these entrepreneurs will succeed at launching profitable firms that hire more workers.
No one can foresee exactly when, say, the increased efficiencies that the downturn obliges many established firms to pursue will make those firms again attractive to investors who then pump more money into them, enabling these firms to expand operations.
No one can foresee or predict any of the details about how recovery will happen. But economics and history tell us that our inability to foresee and predict -- or even to imagine -- how recovery will come in the absence of conscious government stimulus is no reason to conclude that recovery requires conscious government stimulus.
Yet, despite all of our experience with the marvels of free markets, the case for the massive government stimulus plans rests chiefly on people's fear that this time the market will fail. Why suppose that this situation differs from the countless other coordination challenges successfully met by market forces? I can think of no good reason other than the fear that oozes from biased imaginations. Despite experience that should teach us differently, we can imagine market failure much more easily than we can imagine just how markets will succeed.
~George Mason economist and blogger Don Boudreaux