Re: Townhall.com – 2/18/2009 – “Economic Miracle” – Walter E Williams

The n*(n-1) law Williams cites applies only to mutually distinct entities interacting in a one-to-one basis. In fact, most real communications are partly hierarchical and actually follow fewer but longer communication paths, and/or have some communications so infrequent that for all practical purposes they do not occur at all. Sometimes, entities are so strongly correlated that they can be counted as a single entity, or groups of related entities combined to form an independent super-entity --- in mathematical terms, an n*n matrix can often be transformed to a set of m block-diagonal matrices upon which computation are greatly simplified.

In chemistry and physics, statistical mechanics (the physical sciences analog to the workings of the economic free market) can explain well known observational laws and can be used to calculate results independent of the use of those observational laws. But many computations within the domain of statistical mechanics can be made to greater accuracy and with much less effort by using the observational laws instead of statistical mechanics. You don’t need statistical simulations of a zillion consumers to come up with a problem specific version of the law of supply and demand every time you want the know the price of bread at the store --- you go to the store and look. There are things the market can tell us that Congress and/or administration regulators can’t, but there are lots of things that Congress and/or administrative regulators and/or just us plain consumers on our own can figure out without waiting for the market to tell us what happened. If in fact only the market thru its action could tell us where it is going, businesses would be unable to make and carry out financial, production, and marketing plans even as long as 1 day in advance. Businesses can and does plan to a great deal of success, and so can/does government.

If government were to want to open a grocery store (other than the military supply distribution chains it already runs), what in the world makes Williams think government would appoint a czar for every product. Government would structure their grocery business just like private industry would. It would first create an agency (the government analog of a corporation), select a management team, then middle managers, and then workers. The agency would have divisions, just like a supermarket, where wine, meats, fresh vegis, bakery, etc, needs would be centralized. And there would be agency wide support divisions, such as finance, personnel, and purchasing. In fact, except that the board of directors (Congress) can’t fire the chairman (the President) except for high crimes or misdemeanors, there would be little structural differences between a government grocery store business and its corporate analog.

As for an auto czar, would he/she be doing anything that Warren Buffet does not do for all the companies under his control? Buffet doesn’t run the businesses Berkshire Hathaway owns, but he does oversee their budget and their CEOs.

In my opinion, Williams is batting 0 for 4 on this article. He doesn’t seem to understand the workings of math, economics, business, or government.

Williams says “If you have doubts about Adam Smith's prediction, ask yourself which areas of our lives are we the most satisfied and those with most complaints. Would they be profit motivated arenas such supermarkets, video or clothing stores, or be nonprofit motivated government-operated arenas such as public schools, postal delivery or motor vehicle registration? By the way, how many of you would be in favor of Congress running our supermarkets?“ While I’d prefer private grocery stores to government ones, I see little difference between state and private universities (there are really good ones and some pretty lousy ones in both and I’ve studied and taught at both) and definitely prefer buying my physical security (police and military) from the government rather then private providers.