The cancerous eyes of the state

Murray Rothbard expands his logical case against empiricism in economics, specifically, explaining how the systematic gathering of statistics tends to lead inevitably to bureaucracy and increased government intervention in the economy:

[S]tatistics are desperately needed for any sort of government planning of the economic system. In a free-market economy, the individual business firm has little or no need of statistics. It need only know its prices and costs. Costs are largely discovered internally within the firm and are not the general data of the economy which we usually refer to as “statistics.”

The “automatic” market, then, requires virtually no gathering of statistics; government intervention, on the other hand, whether piecemeal or fully socialist, could do literally nothing without extensive ingathering of masses of statistics. Statistics are the bureaucrat’s only form of economic knowledge, replacing the intuitive, “qualitative” knowledge of the entrepreneur, guided only by the quantitative profit-and-loss test. Accordingly, the drive for government intervention, and the drive for more statistics, have gone hand-in-hand….

Suffice it then to say that a leading cause of the proliferation of governmental statistics is the need for statistical data in government economic planning. But the relationship works also in reverse: the growth of statistics, often developed originally for its own sake, ends by multiplying the avenues of government intervention and planning. In short, statistics do not have to be developed originally for politicoeconomic ends; their own autonomous development, directly or indirectly, opens up new fields for interventionists to exploit.

Each new statistical technique, whether it be flow of funds, interindustry economics, or activity analysis, soon acquires its own subdivision and application in government.

In the RGD chapter entitled “No One Knows Anything”, I demonstrated how wildly inaccurate, mutable, and untrustworthy the economic statistics on which so much government policy is predicated are. But the problem is that regardless of how inaccurate or even irrelevant they are, they will be used to justify government action in various areas of the economy and inspire public malinvestment while simultaneously exacerbating private malinvestment. If statistics are the eyes of the state, the central flaw with them that they will always be short-sighted, astigmatic, subject to optical illusions, and prone to aggressive intraocular lymphomas.


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