The Office for National Statistics has found 1.7% of GDP down the back of the sofa. Isn’t that a lovely proof of Hayek’s contention? The centre never will have the data - let alone the information - to be able to plan the economy in detail. Therefore government should not try to plan the economy in detail because it doesn’t, and never will have, the information necessary to be able to do so.
In more detail:
The UK economy shrank less and bounced back faster during the pandemic, official figures show, after the Office for National Statistics (ONS) admitted its previous assumptions were too gloomy.
The revised figures add nearly 2pc to the size of the economy as of the end of 2021, meaning Britain recovered to its pre-pandemic size almost two years ago.
We’ve had several years now of shrieking - sorry, politics - insisting that there’s something fundamentally wrong with the British economy because look, look, slower recovery. This has allowed every gimcrack and shyster to promote their plans to fix what ails. More tax, wealth taxes, harder and faster on renewables, no doubt there’s someone out there who’s used this to argue for more childcare. In fact we’re pretty sure we have seen that one.
All of these using as their supporting crutch the untruth that there has been a relative underperformance by the UK economy. Which, to repeat, has not in fact happened.
This, of course, kills off that idea of Keynesian demand management of the macroeconomy. Which does try to insist that government should be able to fine tune by percentage points and fractions of GDP. If we can find 1.7% in the crevices of a chaise-longue then we really do need to kill off that idea.
But this is also of wider applicability. Because if numbers are this bad and misleading then all finer plans are going to be in error as well. The number of people in the country is not known to any useful - for planning purposes - level of accuracy, the number of women working, the gender pay gap if indeed we even have one and on and on and on. Government simply doesn’t have the data, - again, let alone the information - to be able to plan these things in detail. So, it shouldn’t.
The best we can do is set general rules on incentives, fairness, equity and so on. The structure of the legal system, some interventions on the pricing of pollution and so on. But they do have to be general, given the lack of that data. Then leave be and see what happens.
That this accords with our own desires for how the country is run might seem convenient. We would say that, wouldn’t we? Which is to misundertand. We hold the views we do because we’ve read Hayek’s Nobel speech, grasp the implications of The Pretence of Knowledge.
This finding by ONS is not just a convenient crutch for our views, it’s the reason for our views. Government doesn’t know enough to plan - therefore government should not plan. QED.