I was relaxing this evening while still on the clock and reading, with the full knowledge of the boss, some writings by groupies of Peter Bauer. Among other things, Bauer was an economist who saw things going terribly wrong with the way the US was trying to help Third World countries decades ago. Bauer acknowledged that economies were complex systems that couldn’t be cured with broad brushstrokes. But in the sense that if an oil painter wants to make a shade of green from primary pigments he would be well-advised to try mixing blue and yellow hues – leadership trying to improve the economic lot of a nation should probably try three things that were ingredients for success in the historical record:
- guaranteeing safeguards for personal property, as it is difficult to invent a better plow when all the prototypes keep walking off;
- letting buyers and sellers set their own prices, as price controls are synonymous with inefficiencies; and
- establishing the rule of law, as the first two conditions are no good if, say, they are hard-won from a planning board only to be overruled by the whims of city council.
Bauer also debunked some myths in his field. He showed that poverty did not always breed poverty, but people and nations were able to lift themselves to better circumstances through intentional effort and wise choices. People try to help the poor by sending money, but people respond to incentives. When freebees are distributed for doing nothing, nothing is positively reinforced at the expense of explorations and investments that could improve the human condition. “It is often nearer the truth to say that capital is created in the process of development than that development is a function of capital accumulation.”
What I liked best was Bauer’s articulation of the perspective that people are so much more than whining knaves of the state. Speaking of central planning, he said:
It reinforces the authoritarian tradition of many underdeveloped societies, which inhibits the development of faculties and motivations congenial to material advance. By continuing and extending state control over the lives of the population, central planning reinforces the subjection of the individual to authority. Such a development discourages self-reliance, personal provision for the future, sustained curiosity, and an experimental turn of mind.
Yes, it is the producers, the innovators, the takers of calculated risk that improve standards of living. Redistribution schemes are lucrative only for rent-seekers, and they reduce geniuses to parasites. This much I reviewed in the book whose page I had marked with the pen I lifted from my boss.
