Tuesday, December 4, 2012

Planes, trains, and central planning

I recently took the family to the 36th annual Oklahoma City Train Show. Since my 3-year-old son thinks trains are the reason for man's being, this event was a big hit. Several of the displays were quite impressive. It is always amazing to me how diverse and intense human interests can be.

Looking at the various model towns and layouts, I couldn't help but think how much these models look like the real world but are in fact so very different. There is a lesson here for economics. Our models are vague facsimiles of what human existence looks like. They are not complete representations. We zone and plan cities as if we were designing a model train set rather than establishing incentives/disincentives in relative darkness.

The human world is filled with incredible complexities no individual or group can possibly know, understand, or fully appreciate. The train set world is a design-able project aimed at satisfying one train enthusiast or at most a small group. The human world must evolve over time with many random, chaotic elements interceding. The train set world is fixed.

There is no cause and effect in designing model train layouts aside from the designer wanting something and then acting to bring it about. But cause and effect is multidimensional and phenomenally jumbled in the human world. Of course this inconvenient fact need not stop our attempts at assigning cause to effect. Hence, renters and multi-unit housing cause higher crime rates and lower home values. Good urban planning causes successful restaurants and profitable entertainment districts.

Yet again I hear Hayek:
The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.