China Is About To Make A Mistake That May Rival Its One Child Policy

China avoided the world recession that started in 2009. The wise communist party, we are told, ramped up infrastructure spending – unimpeded by the need for licenses, court reviews, or rights of way. The government pumped in just enough infrastructure spending to maintain China’s healthy growth rate.

Skeptics of democracy and free enterprise waxed eloquent about China’s state capitalism, as directed by China’s communist party. We want more of what China is having over here – was the refrain.

Democracy and free markets indeed make mistakes. No one promised free sailing of steady growth, low unemployment, and the absence of business cycles. Bubbles and busts have been a part of the capitalist system since the Dutch Tulip Bubble of 1637. We can debate the role of government in the U. S. housing bubble and in Europe’s banking and Euro crises, but no proponent of market capitalism has promised a bubble-free, recession-free world.

The proponents of state capitalism and a one party system do make such promises. The Soviet Union promised that “scientific planning” would lead to steady growth, innovation, and the eventual overtaking of the United States. China’s communist leaders laud their “socialism with a Chinese face” in which sober and wise party and state officials can be counted upon to make the correct decisions.

History tells another story.  The most disastrous blunders have been committed by the scientific planners of one party states. Miscalculations and errors of the market system tend to be self-correcting if they are left alone. Even when they are mishandled, the damage is minor compared to the blunders of the state capitalists.

go to forbes.com

Obama Care’s Commissar’s Conceit

As a writer on  Soviet planning, I am struck by its parallels with Obama Care.  Both believe their planning is “scientific” and executed by “the best of the best,” who know what is best for ordinary people. Both types of planning commissars suffer Hayek’s “fatal conceit” – the belief that they can plan incredibly complex economic systems. Their “scientific” plans, however, fall apart under the weight of unintended consequences as ordinary people circumvent their genial rules and instructions.

The New York Times’ Mr. Health Care Mandate features economics professor cum scientific planner, Jonathan Gruber. After the Supremes’ brutal questioning, the Times probably felt that Obama Care needed a boost from Gruber, who, by his own admission, “knows more about this law than any other economist.” It was to Professor Gruber that the White House turned to design its new health care law.

The Times reassuringly describes Gruber as “the numbers wizard at MIT,” who has “spent decades modeling the intricacies of the health care ecosystem.”  Gruber has “brought a level of science to an issue that would otherwise be just opinion.” The Soviets reserved such praise for their planning commission, Gosplan. I draw little comfort from Professor Gruber’s scientific-planning credentials, especially when I learn “he’s the only person you can go to for that kind of thing.”  Gruber, aided by his MIT graduate student assistants, is a one-man Gosplan. Science is better served by competing ideas not by monopoly.

go to Forbes.com