The Fatal Conceit Of Dr. Know-It-All

Chacha Manmohan S Gandhi has predicted that the Indian economy will grow at the rate of 8 to 9 per cent this year.

There are various untruths hidden in this statement, which I will seek to unravel below:

First: The economy is not an “organism” that grows in the manner of animals or plants. In reality, there is no “national economy” at all: what exists are millions of businesses and firms, some of which grow, some of which collapse, some of which make losses, and some of which remain the same. All this talk of “India growing at 9 per cent” is just a macroeconomic average, that too an aggregate that means nothing – except to the Keynesians, who wish to manipulate policies in order to achieve “targets” that they themselves set.

Second: The idea of a “national growth rate” is as meaningless as the “rate of inflation” or the “rate of unemployment.” In reality, there is no “price level.” Nor are workers unemployed uniformly throughout the land. All these are but statistical averages, compiled to aid Keynesian-style manipulations of interest rates, credit creation and the money supply. They are the “knowledge” upon which Keynesians rely. Just as central planners rely on elaborate statistics. To those who consider this entire paradigm faulty, like the Austrians or the classical liberals, the nation would be better off if this data was not compiled. Recall that Hong Kong became a developed country, with the highest per capita ownership of Rolls-Royce cars, because Sir John Cowptherwaite, the colonial governor, refused to set up a bureau to collect economic statistics. Cowptherwaite said that such a bureau was dangerous, because its data might be misused by some socialist or Keynesian in the future. The use of meaningless statistical data is the hallmark of socialism and Keynesiansm. Indeed, the architect of Indian planning, Nehru’s close advisor PC Mahalanobis, was a statistician. I have often said that the Indian Statistical Institute (ISI) is a greater danger to India than Pakistan’s intelligence agency, also called ISI.

Lastly: Note how Chacha Manmohan is “predicting” the future. He and his team of planners could not predict the economic meltdown. Although they are all-powerful, although they are armed with all the data, they could not predict anything of any consequence. Chacha Manmohan, throughout his term, was babbling on and on about 9 per cent growth, almost as a mantra for the devout to swallow and repeat – when the financial markets collapsed. All their investments in US T-bills are in jeopardy. All their bank credit to investments in real estate are seen to be malinvestments today. Not only that, they cannot predict how the stock markets will behave.

This inability to predict anything in economic life is harsh reality. If anyone could predict market outcomes accurately, he would be hugely rich. The market is based on “radical uncertainty” – that is, there are risks that cannot be insured. If these risks are beyond insurance, what possibility is there that a team of government baboos can predict the future of an entire national economy?

Real knowledge is always based on an appreciation of the limits to reason, to a deep understanding of what cannot be known. We must know what we cannot know, if we are to claim to know anything at all.

Keynesianism and central economic planning are both examples of “fatal conceit”: that The State knows it all.

In reality, they know nothing. And they know they know nothing. They just keep up the pretence, in order to beguile the sheeple.