August 7, 2022

The particular Fallacy of Calls for a “Manhattan Project” to Solve National Economic Challenges

Politicians, academics, and the media often require a new Manhattan Project to cope with economic issues

A lot of see the World War II project to construct an atomic bomb as a template for government action to solve what appear to be nationwide economic problems beyond the scope of private organization.

The analogy fails upon several levels.

First of all, the Manhattan Project was not an economic problem per se. It was a military growth and procurement problem. Generally there was  and still is  no commercial demand for a tool of mass destruction.

Secondly, there is a distinction between very large commercial tasks and very large government projects. As Ludwig von Mises explained in his first excellent book,   Economic Calculation in the Socialist Commonwealth , financial calculation is possible only with private ownership of the means of production. Government does not very own means of production in the real, private sense of the phrase. It uses only resources that it has confiscated from the private economy.

Because government is not a private entity with resources acquired by means of cooperative exchange, it is missing the vital link of capitalist entrepreneurship and the concomitant hierarchy of ordinal choices from which economic calculation runs. In other words, government managers may not know which projects to pursue nor which factors of production to use.

For example , should government engage in a vast national energy self-sufficiency project? If so, should it build wind and solar farms or  increase nuclear power or even non-renewable fuels? If government pursues all the above, in what proportions should it invest? An equal amount of money to wind, solar, nuclear, gas, coal, geothermal, hydroelectric, and maybe some other source? Without private ownership of the means of manufacturing, there can be no rational solution and no true economic solution.

A further and even more basic problem arises when considering whether government should look for any economic goals aside from allowing the people to make private decisions with minimal regulatory encumbrances. Government managers do not have special insight into markets’ upcoming. In fact , they have little reason to.

Because of this, we see government supervisors squandering vast amounts of community money on completely wasteful projects like wind plus solar energy fields. They pursue their own private preferences, just as  Public Choice Theory   predicts. They are not put through the discipline of the market and of owners who need a return on their investments.

In Conclusion, Expect the Worst

In conclusion, I fright that the US and other Traditional western governments are poised to waste vast amounts of money pursuing completely fruitless projects. The particular Ukraine war has damaged economies and seems to justify government intervention to “ fix” the most visible undesirable consequence— skyrocketing energy plus food prices.

The West seems decided on keep in place its financial sanctions on Russia. Instead of adding insult to injury by implementing a “ Manhattan Project” for power and food, the Western economies should deregulate these types of markets and reduce taxes. But since deregulation and lower taxes require less management and enforcement, governments who desire to look to be “ doing something” about problems they had a great hand in causing can be expected for making things even worse. You heard it here first.

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