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Quote of the Day 12/16/09

Is it really likely that a National Planning Officer would have a better judgement of ‘the number of cars, the number of generators, and the quantities of frozen foods we are likely to require in, say, five years,’ than Ford or General Motors etc., and, even more important, would it even be desirable that various companies in an industry all act on the same guess?

Friedrich Hayek – New Studies in Philosophy Politics, Economics and the History of Ideas

Does anyone remember the U.S. Synthetic Fuels Corporation, also known as SynFuels? This corporation was established by Jimmy Carter in response to the oil embargoes of the late 1970′s. The problem was well-defined: use coal or shale to create liquid hydrocarbon fuels such as gasoline and kerosene. The goal was production of 500,000 barrels per day of crude oil equivalent by 1987. By 1986, it had spent $1.2 billion, and, if all the investments had panned out, would have reached 2% of that goal.

So what went wrong? The failures fall into 2 broad categories. First, like most government agencies, the corporation to respond to the changing conditions of a dynamic marketplace for oil. With no shareholders hold them to account, bureaucrats make decisions with no regard to costs or profitability. The second, and more important, reason was the tendency of politicians to involve themselves in the decisions about how to spend money on research and projects. Politicians make their decisions based on the satisfaction of their political constituencies, not the benefit of the nation as a whole.

This is relevant today in two distinct areas. First is the Green Jobs mess. Once again, centralized planning will fail utterly in predicting which green technologies will be profitable and, as a result, actually sustainable.

But the larger concern is in health care. When politicians decide what will and will not be covered, who can buy, and how much they will pay, all the elements that would contain cost in a free market are left circling the drain.

Yesterday BHO said that if Congress fails to act, insurance premiums will rise. What he did not say is that if Congress does pass this mess, premiums will not merely rise, they will skyrocket.

fiat lux!

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