Tuesday , February 18 2020
Home / Adam Smith Institute / As Hayek didn’t quite point out about supranational governance

As Hayek didn’t quite point out about supranational governance

Summary:
Hayek’s point, in The Pretence of Knowledge, was that the centre couldn’t possibly have the information to be able to plan or direct either an economy or society. Not in any detail at least. We might add a more modern coda to this, that the higher and more abstract the “centre” becomes as a source of governance the worse the problem becomes. Take this from the new head of the International Monetary Fund for example:Speaking at the Peterson Institute of International Economics in Washington, Kristalina Georgieva said new IMF research, which compares the current economy to the “roaring 1920s” that culminated in the great market crash of 1929, revealed that a similar trend was already under way. While the inequality gap between countries had closed in the last two decades, it had increased

Topics:
Tim Worstall considers the following as important:

This could be interesting, too:

Pierre Lemieux writes Arguments for Compulsory Vaccination

Bruce Yandle writes Is the 'Goldilocks economy' dead or just sleeping?

Veronique De Rugy writes The Huge Difference Between Boris Johnson and Donald Trump

Donald J. Boudreaux writes There’s no app for social engineering

Hayek’s point, in The Pretence of Knowledge, was that the centre couldn’t possibly have the information to be able to plan or direct either an economy or society. Not in any detail at least. We might add a more modern coda to this, that the higher and more abstract the “centre” becomes as a source of governance the worse the problem becomes. Take this from the new head of the International Monetary Fund for example:

Speaking at the Peterson Institute of International Economics in Washington, Kristalina Georgieva said new IMF research, which compares the current economy to the “roaring 1920s” that culminated in the great market crash of 1929, revealed that a similar trend was already under way.

While the inequality gap between countries had closed in the last two decades, it had increased within countries, she said, singling out the UK for particular criticism.

“In the UK, for example, the top 10% now control nearly as much wealth as the bottom 50%. This situation is mirrored across much of the OECD (Organisation for Economic Co-operation and Development), where income and wealth inequality have reached, or are near, record highs.”

Leave aside differences of views here - we are not worried by inequality in the manner that is so fashionable these days. Rather, look at the facts being trotted out.

UK income inequality is lower than it was in 2008, lower than it was in 2001, lower than it was in 1990. This is not what we would associate with something rising to record highs.

The problem with any current measure of wealth inequality is that we don’t - unlike with income - include any of the things we do to reduce wealth inequality. The calculations deliberately exclude any political, government or state redistribution of wealth - this isn’t the way to see what needs to be done that’s the way to see what would be if we didn’t do anything already. It’s not even the way to measure what is, it’s to measure what might have been.

If international advice on governance is to be so divorced from reality then that international guidance isn’t going to be all that useful really. Something entirely predictable given that Nobel acceptance speech from Hayek. Those in the international institutions simply don’t have the knowledge to be able to tell us anything useful about what we should do.

Media enquiries: 07584 778207 (Call only, 24 hour)

Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

Leave a Reply

Your email address will not be published. Required fields are marked *