Thoughts on economics and liberty

Oops, Tim Harford puts his foot into his mouth

Just the day after I wrote a blog post praising Tim Harfod someone pointed me to his article here, in which he writes:

There’s no logical reason why an economy couldn’t be 100 per cent public sector. 

I'm afraid after reading this I must downgrade Tim many, MANY notches.

It is true that (a minimal) government provides a service (e.g. defence, police, justice, and appropriate conditions permitting, some infrastructure and a frugal social minimum). Along with Adam Smith I see a role for government. Tim's following comment is therefore true: 

That’s a fallacious line of reasoning: it assumes that the public sector workers of yesterday are going to be the same people as the public sector workers of tomorrow, after several years of chipping away at their real incomes. They might not be. I might decide to become a mobile phone salesman instead of an economics teacher.

We are talking about competitive market based remuneration here. Nothing special about it. Working for the public sector need not be a "sacrifice" or charity. So far so good.

But to go from here to the WILD assertion that Tim then makes (above) about there being no theoretical difference between an economy which is 100 per cent public sector-based and a private economy is BEYOND BELIEF.

And to suggest that the public sector can be as innovative (even inventive) as the private sector is a sign of serious economics illiteracy. I hope that Tim has read Terrence Kealey and Timothy Ferris. Such egregious claims of "creativity" in the public sector are false.  

This idea that there is no theoretical difference between a private economy and public sector economy is a characteristic of the foolish "discipline" of welfare economics, in which many unworthy Nobel prizes have been awarded. Just because someone gets a "Nobel" prize doesn't make that persons's views sensible from any perspective. In economics, at least half the "Nobel" prizes have gone to confused socialists and Keynesians.

True, Tim does refer to incentives as a variable, but this issue is not about incentives. It is about FREEDOM. It is about our right to live our live our lives without government meddling. 

We TOLERATE a modicum of government in order to achieve a level of social services such as security that will let us innovate and produce goods. Yes, public servants are part of the "market", but they are NOT producers (in the typical sense). Big difference.

For anyone to imagine that socialism and capitalism are theoretically equivalent is a sign of a major gap in their economics education. I don't know what's come over Tim, but surely he's put his foot DEEP into his mouth.

Let him take it out and put it back on the ground. Tim, please read Hayek's Constitution of Liberty if what I've said doesn't make obvious sense. If you can't understand what I'm saying your brain must have been destroyed by the "macroeconmics" courses you took which often equate the 'solution' of the 'central planner' with the market's.

Tim, you're a sensible fellow. Do apologise for this ABSURD error. That will help retrieve your reputation from the brink.

Sanjeev Sabhlok

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7 thoughts on “Oops, Tim Harford puts his foot into his mouth
  1. Joe Bolsiano

    'True, Tim does refer to incentives as a variable, but this issue is not about incentives. It is about FREEDOM. It is about our right to live our live our lives without government meddling.
    This is complete tosh. Not even worth arguing with. Assemble an actual argument, rather than a list of beliefs and assertions, and I might bother with you. Otherwise stop wasting our time.
    I can understand why someone who has to live with India's massively corrupt public sector might think like this – you do really need to sort it out – but really! I'm surprised at you!

  2. Sanjeev Sabhlok

    Joe, your defence of Tim by attacking me is futile. Doesn’t work.

    Tim has made an absurd and dangerous assertion. Let him prove his case himself if he can.

    As far as the foundational theory of liberty (and the state) is concerned – about the “system of natural liberty” that Adam Smith wrote about, and which forms the basis of all economic thinking – you’ll need to go back to John Locke. Economics is meaningless without understanding its political foundations in the concept of liberty. And liberty precludes the possibility of (100%) employment by the government.

    As principals, we hire a government to provide certain services. It has no business to exist independently of us.

    These are not assertions, Joe. If you wish you can read Hayek, but also my manuscript (under preparation), DOF. My basic remedy for anyone who tries to take over human liberty is to recommend total destruction of that person/idea. Also known as revolution. Those who broke away from an oppressive England in 1776 will remember. Those who beheaded Charles I will remember. And those who overthrew communist USSR will recall, as well.

    I’m amazed that neither Tim nor you understand your roots.


  3. ChrisW

    I don't think Tim's article is advocating communism! He was responding to people who claim that private sector workers are wealth creators and support the public sector through their taxes. His point was that this thinking is incorrect. At the end of the day both public and private sectors produce goods and services.
    If you believe the "wealth creators" then the reason a 100% public sector is impossible, is that there'd be no private sector to pay for it. This is what Tim meant when he said "There’s no logical reason why an economy couldn’t be 100 per cent public sector. You’re making it sound like that’s impossible as a matter of simple arithmetic."
    I don't think Tim was suggesting that a 100% public sector is a good idea, he was just using the idea to prove a point. I agree with you that a small public sector probably is best, but that's because the private sector is usually more efficient at doing things. Its not because public sector workers are a drain on society and are using all the wealth created by the private sector.
    Later in your blog I was confused when you said that 'public servants are part of the "market", but they are NOT producers (in the typical sense).' What does this mean? Early on you said that the police should be part of the public sector. But surely the police provide a service to the community (i.e. enforcing the law). Doesn't this make them producers of a service? Just like a doctor, hairdresser, private security firm or an aircraft designer?
    Maybe you mean that while the public sector can produce a service it's incapable of producing a physical good that you can drop on your foot. But I'd disagree with that. In the UK the government used to build trains, run power stations, lay telephone lines and dig up coal. In some ways it was less efficient than the private sector would've been, but it was still able to do it.


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