A crisis of authority Pierre Lemieux's somebody in charge: a solution to recessions?

• Author: Cochran, John P.

On January 9, 2009, President-elect Barack Obama stated, "There is no disagreement that we need action by our government, a recovery plan that will help to jump-start the economy." A month later, in a full-page response paid for by the Cato Institute (2009), more than two hundred prominent economists responded, "With all due respect, Mr. President, that is not true." The economists' statement, which in retrospect proved much more prophetic than the administration's claim that the stimulus bill was necessary to keep the unemployment rate from reaching 8 percent, went on to argue that "it is a triumph of hope over experience to believe that more government spending will help the U.S. today." Three years later, despite massive actions by the authorities to stimulate, direct, guide, or jump-start the economy, unemployment remains persistently higher than not 8 percent, but 9 percent. Because of "regime uncertainty," the prospects for significant job creation in the current "recovery" remain bleak (Theroux 2011).

The calls for urgent action, for somebody to be in charge, during this "national job emergency" continue. "[S]itting by passively is no longer acceptable. In fact, it constitutes cruel and unusual punishment of the American workforce" (Blinder 2011). Are such calls for additional action justified, or do policymakers have blinders on in regard to the ineffectiveness and counterproductiveness of the ongoing attempts to have take charge? Pierre Lemieux asks precisely this question: "[D]o we need somebody in charge to control economic crisis?" (p. 155). He argues that the continuing call for action, for somebody to be in charge of recovery, rests on two hypotheses that are too often taken for granted: "[T]he economic crisis would occur without the authorities guiding hand," and "these authorities know how to manage the economic cycle" (p. 39). Supported by a blend of theory and historical evidence, Lemieux argues convincingly that having "somebody in charge" is not only not a solution, but most often (everywhere and always?) a factor in generating the crisis and in postponing or stifling recovery.

Lemieux's book Somebody in Charge: A Solution to Recessions? (New York: Palgrave Macmillan, 2011) is a very useful contribution to the literature on the recent financial meltdown, recession, and slow recovery. More important, the work considers the broader question of government's appropriate role in generating prosperity. Lemieux springboards from the analysis of current conditions to consider a much broader and in the long run much more important question: "A modern economy is an incredibly complex system. Can Authority manage it?" (p. 9).

This question of the government's role in determining the "causes of the wealth of nations" dates to the origins of economics or political economy as a discipline. According to Edward Prescott, "[S]tandards of living were more or less constant from the beginning of civilization until the industrial revolution [sic]; then something changed" (qtd. in Snowdon and Vane 2005, 354). Adam Smith was one of the first to come to a judgment of what had changed. The emerging prosperity in Great Britain began around 1700 (Skousen 2001, 15) and was proceeded and accompanied by a lessening of authoritarian control of economic activity. Smith observed in 1755, "Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things" (qtd. in Cannan 1976, xliii, emphasis added). Smith later elaborated:

All systems of either preference or of restraint, therefore, being thus completely taken away, the obvious system of natural liberty establishes itself on its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and bring forth both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of society. ([1776] 1976, 650-51) The Smithian vision of prosperity tied to individual planning and initiative did not go unchallenged. The world was then, as now, not an unhampered market, but a heavily interventionist (mercantilist) economy. Mixed economies have much...