The fallacy behind calls for a ‘Manhattan Project’ to solve national economic challenges – OpEd – Eurasia Review

By Patrick Baron*

Many regard the plan to build an atomic bomb during World War II as a model of government action to solve what appear to be national economic problems beyond the scope of private enterprise. The analogy fails on several levels.

First, the Manhattan Project was not an economic problem per se. It was a problem of military development and supply. There was and still is no commercial demand for a weapon of mass destruction.

Second, there is a difference between very large commercial projects and very large government projects. As Ludwig von Mises explained in his first great book, Economic Calculation in the Socialist Commonwealth, economic calculation is only possible with private ownership of the means of production. The government does not own the means of production in the true private sense. It only uses resources that it confiscated from the private economy.

Because government is not a private entity with resources acquired through cooperative exchange, it lacks the lifeline of capitalist entrepreneurship and the concomitant hierarchy of ordinal preferences from which economic calculation derives. In other words, government managers would not know which projects to pursue or which factors of production to use.

For example, should the government commit to a vast national energy self-sufficiency project? If so, should it build wind and solar farms or develop nuclear energy or even fossil fuels? If the government pursues all of the above, how much should it invest? An amount of money equal to wind, solar, nuclear, natural gas, coal, geothermal, hydro, and maybe some other source? Without private ownership of the means of production, there can be no rational response and no real economic response.

An additional and even more fundamental problem arises when one asks whether the government should pursue economic objectives other than to allow the people to make private decisions with a minimum of regulatory encumbrances. Government officials have no particular vision for the future of the markets. In fact, they have little reason to do so.

As a result, we see government managers wasting huge sums of public money on completely useless projects like wind and solar power fields. They pursue their own private preferences, just as Public choice theory predicted. They are not subject to the discipline of the market and owners who demand a return on their investments.

In conclusion, expect the worst

In conclusion, I fear that the United States and other Western governments are about to waste huge sums of money pursuing totally unsuccessful projects. The war in Ukraine has disrupted economies and seems to justify government intervention to “fix” the most visible negative consequence: soaring energy and food prices.

The West seems determined to maintain its economic sanctions against Russia. Rather than add insult to injury by implementing a “Manhattan Project” for energy and food, Western economies should deregulate these markets and cut taxes. But since deregulation and lower taxes require less management and enforcement, we can expect governments that wish to appear to be “doing something” about the problems they helped to aggravate. You heard it here the first time.

*About the author: Patrick Barron is a private consultant to the banking industry. He taught an introductory Austrian economics course for several years at the University of Iowa. He also taught at the University of Wisconsin Graduate School of Banking for over twenty-five years and has made numerous presentations to the European Parliament.

Source: This article was published by the MISES Institute

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