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Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Questioning an assumption

I often get the impression – and that is all that it is – that much of the world of government is concerned with achieving stability of various kinds. But there are “good” forms of stability – such as safe and secure property rights, honest money, and laws to protect the person from violence – and “bad” kinds, such as the stagnation of a flat-lining economy (as in 1990s Japan). Consider, we used to hear Gordon Brown drone on, in that manner of his, about “economic stability” (he spectacularly failed to attain it); we used to hear critics of George W. Bush’s foreign policy claiming that he was undermining the supposedly marvellous “stability” of the Middle East; and of course when it comes to issues such as governments’ monetary and fiscal policy, “stability” and the smoothing of all that naughty market activity is taken as a public good.

Sure, the last few years have been frightening in some ways on the economics front, but the gains to living standards across the planet, by and large, have not been thrown away. And in a recent book by Deepak Lal, in “Reviving the Invisible Hand”, he notes that some, “unstable” economies such as Thailand have managed to chalk up much greater growth in wealth overall than those which have grown at a more sedate, less volatile way.

Of course, it might even be argued that it is difficult to distinguish total stability from death. A straight line on a graph, remember, resembles the line of one of those gizmos that tells a doctor that the patient has pegged out.

21 comments to Questioning an assumption

  • John Farrier

    “Stability” is a euphemism for “controlled”.

  • Quentin

    How much do you trust the figures from Thailand?

  • Meanwhile, the federalization, serfdom and impoverishment of the west proceeds apace.

  • Any system that is sane has to work for stability – not for the general benefit, but for its own; instability, even if beneficial, is unpredictable, and any system that does not seek stability will sooner or later find itself undermined. That’s politics.

  • Dishman

    Ambient (room) temperature is the only stable temperature for life forms.

    Death is stable. Life is chaotic.

    Get over it.

  • Laird

    stability = predictability = order = control.

    That’s why statists hate capitalism. It’s too messy, unpredictable, and uncontrollable. They like managed, not creative, destruction.

  • Paul Marks

    On the question of “how much can we trust figures for Thailand” – the incentives (both to avoid the taxman and to attract aid, both internal and external) are for income and wealth to be down played, not exaggerated.

    Actually Thailand was doing well, but the politics have (no surprise) tripped the nation up – and it is not really just riots and so on hitting the tourist trade and business “confidence” (contrary to Keynesian doctrine hard facts matter a lot more than “animal spirits” at least in the long run which Keynes did not live to see, but which must work with).

    What really depressed me about recent events was not the riots on the streets – an economy (even the tourist trade) can deal with that over time. It was the promises of both sides – both Red Shirts and Yellow Shirts promised free health care (and…….)

    It is the ideological bankruptcy of both sides (not the fighting on the streets) that will undermine the economy in the long run.

    Although it can happen almost over night. For example, Burma used to be cited as a example of a free (“chaotic” – it was actually rather orderly, see below) economy in spite of all the collectivist talk (although it should be noted that not everyone in Burma believed in socialism back in the 1950s – indeed it was strongly and passionately opposed by some people). Then the socialist General took over in 1962 and made the socialist talk a horrible reality. Although, doubtless, the Western mainstream media and academics have put the socialist nature of the regime down the memory hole.

    Order does not mean the tyranny of the state – artifical order “taxis” as the Greeks put it, there is also (as Hayek was fond of noteing) natural order “spontaneous” order.

    However, I believe that Hayek (possibly because he follwed Hume – or his interpretation of Hume) in error in stressing the “human action, but not human design” nature of this order.

    The RESULTS of allowing ordered freedom (freedom that does not violate the bodies or goods of others) can not be predicted in advance (not in detail), but that does not mean that people do not make a CHOICE to support freedom, and that it will not die without people BELIEVEING IN FREEDOM.

    This is not just true in the modern world (as Oakeshott sometimes implies – contrasting traditional freedom, with modern “rationalist” ideology, what Hayek called “rationalistic” and Hayek was closer to the truth on the name), it was always true.

    If people (or even most people – or the people with the political punch) stopped believing in freedom in a Greek city state than it quickly became a nightmare with “laws” (regulations) controlling every aspect of life.

    If people stopped believing in freeom in a land in the Middle Ages (especially the de facto private ownership of land and resistance to taxation and so on) then things quickly went in the direction of despotism.

    If anything it is tyranny that is “natural” (something taht “just happens”) as all the incentives for rulers are that way. It is freedom that needs to be deliberatly worked for and deliberatly maintained.

    Deliberatly – by human CHOICE and effort.

    To preserve the right to choose (to preserve freedom) one must choose to do so, and then act accordingly.

  • Johnathan Pearce

    Quentin, I am skeptical of all government numbers, but the numbers that Lal cites in his book come from a variety of sources, and he is a noted debunker of government stats, so if he says Thailand has grown more rapidly than say, India over a period of time X, I am inclined to believe him. In any event, his argument applies to dozens of examples besides Thailand, so the point stands.

  • Peter

    Being the only libertarian in my family and group of friends (Christmas is fun), I have formed the belief that some peole have a strong psychological desire for order – or the appearance of order. They need to cling on to the belief that reason can actually be usefully employed in bringing about certain outcomes. The fact that if this was not the case their work would be useless and their careers vain is a hard pill to swallow, and not likely to encourage a change of mind. I work in the investment consulting industry (advising pension fund trustees), and the amount of good money thrown after bad into vanity investment such as actively managed equity funds (the most common kind, although passive management is gaining ground), despite the overwhelming empirical evidence (which goes back to the seventies) that it is a costly way to lose money in most cases, is staggering. With few exceptions the consultants and asset managers tell oh so believable stories about why their favoured investments should work. A quarter later they tell even better stories about why the investment did not work. In most cases they believe their own stories; they are not hypocrytes. Many jobs in finance and the civil service in particular, and more generally in the higher layers of the economy (marketing, law etc), are effectively applied social science, and as we know the predictive qualities of social science is not good. The fact that Taleb’s book ‘black swan’ has not triggered more suicides in the finance industry than it has (none that I know of) is beyond me.

  • Ian B

    This is one of the reasons I’m skeptical about Libertarians overstating a case for free markets being stable; that is, there is a narrative that central banking/FRB/etc cause boom and bust, and if you switch to hard money, no central bank, no FRB, etc, there will be no boom and bust. That’s a promise of economic “stability” by us.

    Some time ago Johnathan you posted as a SQOTD one of my comments that we should instead learn to love boom and bust, which meant learn to expect and accomodate it. Markets make mistakes, and totally free makrets will IMV still have cluster errors. Certainly current economic systems make them *worse* but ultimately if too many people sink their money into unfeasible railways, tulips or dot coms in the hope of a quick buck, you’re going to get an economic hangover to suffer at some point down the line and that’s going to happen in a libertopia as well.

  • the incentives (both to avoid the taxman and to attract aid, both internal and external) are for income and wealth to be down played, not exaggerated.

    That’s true for individuals. It’s probably less true for governments though. There is a certain incentive to overstate growth to demonstate that you are doing a good job, and also to understate inflation for similar reasons. (As real growth = nominal growth – inflation, these amount to much the same thing). I think there is also an incentive to overstate growth in rural areas, because the nasty truth in much of Asia is that the urban areas are getting richer at the same time that the countryside remains dirt poor. So the statistics are dodgy, and I think there are both upwards and downwards biases to the numbers. Accurate figures are non-existent.

    On the other hand, Thailand clearly is a middle income country at this point. The question is whether it can get through that and become genuinely rich.

  • Mike Lorrey

    At least here in the US, economic gains have been thrown away. Home ownership is now back to less than the level it was at in 2000, and getting worse, while the stimulus money was spent primarily to keep employed government employees, who should be the first people jettisoned in an economic downturn along with budget cutting.
    The common perception here in the US is that any growth overseas has been at the expense of standards of living here, which, if you claim that globally there has been zero net gain, the common perception is entirely right.
    Worse, we saw huge chunks of the stimulus going to foreign companies, for example, cash for clunkers money was primarily spent buying foreign made cars, at least until the government ginned up the whole Prius accelerator “disaster” to make it appear that foreign cars are just as crappy as American models.
    Unfortunately, trying that sort of scam with your average chinese made crap at Walmart is a lot more difficult.
    Hopefully, making the Renmimbi a global currency will boost its value enough that the trade imbalance will get rebalanced.

  • Johnathan Pearce

    Michael, true, governments can and do overstate growth to boast; OTOH, aid agencies and institutions such as the World Bank (which should be closed down), like to exaggerate certain issues if only to justify their raison d’etre.

  • Johnathan Pearce

    Ian B, fair enough; but recall that there are certain aspects of financial instability that can be caused by governments or the side-effects of certain regulations, so the “Austrian” critiques of things such as fiat money and fractional banking fall into that category of “bad instability”, if you see what I mean.

    Some big market dislocations are part and parcel of changes that are ultimately Very Good Things (ie, the Industrial Revolution).

  • Laird

    IanB, where did that come from? I know of no libertarians arguing that free markets are more “stable” than managed economies. On the contrary: we all understand that freedom is messy, that capitalism necessarily includes (nay, embraces) Schmumpeter’s “creative destruction”, that booms and busts are inevitable manifestations of human psychology. Central banks exacerbate booms and busts, but we’ve always had them and always will. The economy tends toward equilibrium but never achieves it; there are too many independent variables. So we’re in a constant state of flux, lurching from one point to another. That’s the fun of the ride; hang on and enjoy it!

  • Ian B


    You may think that, and I may think that, but in my experience a lot of libertarians don’t. In fact when Johnathan posted that SQOTD of mine, there was a lot more criticism than support.

    This ties in with the other thread a few posts down about FRB. There seems to be a quite general belief in Libertarianism of the Rothbardian/Misesian type that booms and busts are the direct consequence of fiat money, central banks and FRB, and some kind of hard currency/free banking/ban on FRB will entirely eradicate them. That is, that cluster errors are entirely a consequence of the current financial system.

    There’s an interesting sub-narrative in there as well that seems to be that errors in the marketplace are entirely due to government interference with market signalling; for instance that if the market set interest rates (rather than the central bank setting a base rate) there would be no investment errors. That seems to me to be ascribing Godlike predictive powers to flawed human beings, and I think it’s grossly overstating what benefits we make expect from a true free market. And I don’t like making exaggerated claims, because when they don’t work out they harm the claimants (in this case, libertarians in general).

  • Laird

    OK, I guess our experiences are just different.

  • Richard Thomas

    The free market is like a steam pressured system that lets off any overpressure through cracks which form and heal occasionally. Government doesn’t like that so it reinforces all the cracks and employs a man to watch a gauge and turn a valve to let the pressure out every now and then. Of course, being the government, the man has a weak bladder, and ADD and the government is shouting “For fucks sake, don’t open the valve” at him over and over.

  • Paul Marks

    Ian B. – I agree with you that creating a social order without error, perfectly “stable” is beyond the wit of man (and would be deeply spooky anyway).

    However, there is a vast difference between individual enterprises going bankrupt and a GENERAL “boom and bust”.

    These things really are created by monetary expansion (seeking to push down interest rates) at that is a “bad thing” – to put it mildly.

    Sorry but there is no way to “learn to love” ecomomic bust (which the phony “boom” creates).

    And such busts play into the hands of the statists.

    The New Deal did NOT help get America out of the Depression – but without the Depression it would have not have been possible.

    Nor, without the bust of 2008, would there be a President Barack Obama.

    I still think most people (even many conservatives and libertarians) have not fully grasped what a terrible thing “President Barack Obama” is – we will all (even those of us who live thousands of miles away from the United States) experence how terrible this is, soon.

    People would not have been so accepting of a vague message of “Hope and Change” (undefined) without the backdrop of the bust of 2008.

    They did not want to see what was behind the curtain – many people still do not want to see the truth.

  • Laird

    Paul, when a large number of people (perhaps still an overall majority, and certainly a majority of academics and pundits) continue think of F.D. Roosevelt with reverence, as our savior and deliverer from the Great Depression, notwithstanding 70 years of evidence to the contrary, do you really expect them ever to grasp “what a terrible thing President Barack Obama is”? With luck we’ll be able to mitigate the worst effects of his disastrous policies after November, and be rid of him entirely in 2013, but my bet is that even then most people will continue to think of him fondly. He will be remembered as the victim of his times rather than his policies, the unfortunate protagonist in a classic Greek tragedy rather than an overtly malevolent force. Because we’re stupid.

  • Paul Marks

    No Laird – we are misled, misled by a propaganda campaign on a truly vast scale.

    Almost every school (including many of the private ones), almost every university, and almost every media outlet (including the entertainment media) pumping out propaganda.

    And yet……

    Most people do NOT think Barack Obama is wonderful (not any more), nor do most people think that government either is (or CAN) solve the basic problems with more spending and more regulations.

    The propaganda campaign is running into the wall of objective reality.

    The one thing the left can not deal with.