Viewpoint

The Government Fetish and the Socialist Dream

Last year, my old Professor, John Peet, launched yet another of his kamikaze attacks on economics and the market order [Public Policy and the Money Fetish, July Viewpoint]. As always he overshot and disappeared over the horizon without trace. Economics and the market order sail on unaware and unscathed.

Peet opens his attack with a blast of machine-gun fire. He charges that economics is not a hard science. A hard science like physics, he writes, is based "on a small number of rock-solid, timeless laws of nature". In comparison, "human social behaviour is culturally determined, and specific to time and place". As Peet sees it, the foundations of economics can never be rock-solid.

Peet's opening fire peppers the sea. Karl Popper taught that the defining characteristic of science isn't rock-solidness but testability. If Popper is right, economics is every bit the science that physics is. Its theories can be tested against experience; for example, the economic theory that a person will buy less, the higher the price, is testable.

Peet himself offers a competing theory. He writes that "human social behaviour is culturally determined", not just culturally influenced. This is a bold theory. If it were true, the price of things wouldn't matter at all. Prices couldn't influence our behaviour because our behaviour would be culturally programmed. Experience shows Peet's theory to be bosh and shows price to have a powerful influence on behaviour across cultures and over time.

Of course, economics is not Peet's main target. His real target is the market order. He attacks with gusto. Peet fires his first cannon arguing that there are limits to growth. As he sees it, we are running out of resources. It's therefore too dangerous to leave people free to use their resources as they choose. The state must take over and force them to make the transition to a "sustainable economy".

Peet's theory is the old "resources are a fixed box". Latter-day Malthusians like Peet continually recycle the theory, notwithstanding the fact that their past dire predictions have all blown up with a bang.

Remember the opening lines of Paul Ehrlich's The Population Bomb:

The battle to feed all of humanity is over. In the 1970s the world will undergo famines -- hundreds of millions of people are going to starve to death....

Or how about the Limits to Growth published in 1972, which predicted the exhaustion of gold by 1981, tin by 1987, petroleum by 1992, and copper, lead and natural gas by 1993.

Contrary to the fixed-box predictions, we are still here and we still prosper. The resource box has proved expandable. The price mechanism ensures that resources are constantly discovered and indeed conserved. The shortages and resource waste that so trouble Peet and his fellow doomsters are features not of the market order, but of state control. Peet's proffered solution is the problem.

He comes round again and fires his second cannon, railing against the money and market "fetish". He doesn't like the idea of people freely transacting. He especially doesn't like the idea that things are worth simply what others will pay for them. Well, what should they be worth? Exactly what Peet thinks they should be! Like all socialists, he is an elitist. He wants the state to ram his values down the throats of others.

His elitism ensures that his second cannon misses by a mile. He just wants to replace people's own choices with his. To use his rhetoric, he suffers a government fetish and an unsavoury lust for power.

With his bullets spent and his cannon all fired, Peet puts his craft into a suicidal dive. His strategy is clear. First, the lightweight fire about science. Second, the heavy threat of global catastrophe: "millions will die unless you do what I say". Third, the world now is greedy and grasping and suffers the money and market fetish: "Oh, for a better world". Fourth: "dream my dream and picture the sharing-caring world of international socialism".

Writing, he claims, as a scientist, he pens the following:

Interpreted creatively and humanistically, in its equally valid meaning of "loving-care", [person-in-community] could incorporate a system-wide perspective that encompasses the "stewardship" role of humans in their relationship with all things, all people and all generations in the global household.

It's this sharing-caring collectivist mush that sees Peet disappear over the horizon without trace. If ever there were a theory tested to utter destruction, it's this one. The Utopian dream of socialism has been put into practice numerous times this past century in a great range of cultures. In practice it has proved bloody, brutal and wasteful, just as the critics of the theory said it would be.

Peet doesn't even come close. The market order and economics sail on unscathed and unaware. His attack fails because it's so muddle-headed. Years ago when Peet taught me thermodynamics and systems theory I thought his attacks on economics and the market order were bang on. I went on to study his "enemies" the better to attack them, only to discover how wrong he was.

The advantage I had was to come face to face with a competing set of theories as a young man. The task then was to test the two sets of theories against the empirical evidence. That, after all, is what science is all about. The evidence is clear. The great advantage capitalism has over its socialist rivals is that it works. Socialism has been refuted. Who is going to tell John Peet?

Rodney Hide is now an inactive environmentalist working as an economist at Gibbs Securities.