There is a real divide among Americans, and it is not Republicans versus Democrats. It is a divide that runs far deeper than political affiliation. The divide is between those who believe they or others can and should control the world and those who believe that the attempts to control are counterproductive and misguided.
Senate majority leader Harry Reid from Nevada has given us great insight into the mind of the wannabe controller. Appearing on MSNBC shortly before Election Day, Reid expressed frustration that he was not doing better in the polls and exclaimed, “But for me, we’d be in a worldwide depression.” “I’ve been running the country, or at least helping to run it,” Reid told a reporter who asked why he was not campaigning more. Reid, like many politicians, is delusional. According to Merriam-Webster, to suffer from delusions is to hold false beliefs “regarding the self or persons or objects outside the self…despite indisputable evidence to the contrary.”
The idea that it is desirable to control a modern, complex economy reflects profound ignorance. Yet, Reid and others in Congress spend almost 100% of their time trying to do just that by considering and passing substantive laws.
Friedrich Hayek has explained the difference between substantive and formal law. Substantive laws are written to achieve specific outcomes. To achieve those ends, law makers pick winners and losers; people are not treated equally under substantive laws. In his seminal book The Road to Serfdom Hayek explained:
Where the precise effects of government policy in particular people are known, where the government aims directly at such particular effects, it cannot help knowing these effects, and therefore it cannot be impartial. It must, of necessity, take sides, impose its valuations upon people and, instead of assisting them in the advancement of their own ends, choose the ends for them. As soon as the particular effects are foreseen at the time the law is made, it ceases to be a mere instrument to be used by the people and becomes instead an instrument used by the lawgiver upon the people and for his ends.
In other words, Harry Reid and other politicians propose laws which benefit some individuals at the expense of other individuals; and importantly, they serve their own political ends to receive sufficient contributions from lobbyists to run their reelection campaigns. They are redirecting the economy towards the ends they prefer and away from the ends that would otherwise have been chosen. These distortions lead to faltering economies and ultimately economic crises.
In The Road to Serfdom Hayek explained why societies regress as they focus on substantive rather than formal law. Formal laws establish the rules of the road, they do not pick winners and losers, and they do treat everyone the same. The U.S. Constitution is an example of formal law. Hayek gives the example of the rules of the road (speed limits, drive on the right, etc.) which are formal laws; substantive laws would order drivers where to go.
The delusional need the deluded in order to obtain and maintain power. The deluded are those who choose to be deceived that Harry Reid, Ben Bernanke, and others can “run the country” and save us from, rather than cause, economic disasters.
Breathless headlines declare that the Fed’s current round of quantitative easing is bold medicine to jumpstart the economy. Newspapers often act as though Ben Bernanke has a magic wand; they’d have us believe that by printing up paper money Bernanke will somehow solve our economic problems.
Of course the truth is no one controls, or can control, the United States economy. Unsustainable budget deficits, crippling substantive laws accumulated over decades, and most importantly, trillions of dollars of assets artificially inflated in price due to past Fed interventions are propelling the country into further economic hardship. Any hope of a speedy recovery is destroyed as the delusional go on believing they can control the economy and the deluded go on hoping that the delusional will save at least them. I wrote “at least them” because the deluded say, “The heck to everybody else; just save me.”
Explaining the virtues of the formal law, Hayek wrote, “In our age, with its passion for conscious control of everything, it may appear paradoxical to claim as a virtue that under one system we shall know less about the particular effect of the measures the state takes than would be true under most other systems.…”
When the deluded are ready to understand and embrace this virtue of the formal law, the Harry Reids and Ben Bernankes of the world will be reduced to giving their opinions at Starbucks and cocktail parties. When they are no longer deluded, the American people will cease to give power to the delusional.