Does the visible hand of government always get it wrong?

[TheKitten]

We all know the invisible hand of the market has great and imaginative solutions. Aside from extremists, nobody really doubts that.

But isn't it equally extremist to assume the visible hand of government gets it wrong every time? To think the invisible hand is some mechanism that always gets the optimal point is magical thinking. Government is a body which legally has the authority to do things other agents generally can't. Laissez-faire market economists tend to think the government should do as little as possible. More moderate ones tend to think sometimes, the right intervention at the right place and time does most people a lot of good and creates no distortions worth talking about.

[Spotty J]

Oh, I see what you did there.

This is actually a straw man argument, because no one argues the government gets it wrong 100% of the time. No one argues private business entities get it RIGHT 100% of the time either. That's why we have bankruptcy laws.

[L. E. Gant]

Government intervention works best when it's NOT visible!

The problem is that journalists tend to push their own agenda, which is often to emphasise when governments (well, the civil service) get things wrong rather than when they get things right.

Government intervention will always cause distortions, especially when it "does most people a lot of good", usually because someone has to pay for it, and that means other people get done a lot of bad. Not that governments shouldn't intervene, but they will always cause distortion.

SO, either governments should take complete control of economics (much as I dislike many of their ideas, Social Credit's version of economics does have a lot going for it) or stick to just maintaining a country's infrastructure to make sure that commerce can happen (although the problem with that is how many outsiders (specifically banks) take control of the real side of business).

[simplicitus]

Spotty J has it wrong. There are too many people who think that the government usually gets it wrong and that is a good enough reason not to let the government try anything. The laissez-faire people are an example (though I don't really know of any laissez-faire economists)

But the reality is obviously different. Most (but not all) governments get most (but not all) things right. There is a reason the U.S. used to have the best educated citizenry in the world, until we started cutting back on funds for education; there is a reason the U.S. used to have excellent infrastructure, again until we started cutting back on funding.

Computers, the Internet, all satellites, and many medical innovations came out of research paid for by the government.

etc.

And the countries with the highest standard of living in the world all have more government involvement in their economies than does the U.S.
http://www.prosperity.com/Ranking.aspx
http://streetlightblog.blogspot.com/2011...r-two.html
http://www.scientificamerican.com/articl...fare-state

Even people who are considered icons of "free market" thought such as Adam Smith and Milton Friedman recognized the need for government intervention in education, infrastructure, taking care of the poor (Friedman proposed a negative income tax)
http://en.wikipedia.org/wiki/Negative_in...fic_models
controlling the currency and regulating the banking system, dealing with negative externalities such as pollution, etc.

Laissez-faire advocates say the private sector can do it all, but:

A. It is clear that they can't.

B. It is clear, looking at the countries where weak governments do not intervene in these constructive ways, that the private sector doesn't either.

As for the invisible hand, it is fine for personal goods, but otherwise, it is no great shakes. It does no basic research, relying on government for that. And when it comes to heavy industry (as opposed to specialty goods) the Soviet Union demonstrated that the invisible hand really wasn't needed. After all, the Soviet Union went from a peasant economy to a super power that was the first in space and the first to reach the Moon - all without the benefits of the invisible hand.

Yes, many market economies are richer
http://delong.typepad.com/sdj/2010/10/ho...atter.html
But it is no miracle worker. Just look at all the market economies in Africa and how poor they are even compared with the Communist economies of the Soviet Union, China, Vietnam, Cuba, etc.