Where were you on September 11th?

I was actually teaching an economics class, and as luck would have it I was describing to my Econ 100 students how airline deregulation has led to increased safety in air travel.  Pete Leeson was my TA.

At a lunch conversation a month of so after that day, Vernon Smith was discussing the difference between risk and uncertainly.  He described an urn filled with ping pong ball, some white, some black.  Risk is about the probability of pulling a black ball or a white ball from the urn.  Then he looked to the group and said, but what if you pull out a green ball!  That, he explained, was September 11th.

The other day in the Washington Post, I believe, there was an article on those in the security business who try to prepare for days like September 11th, and the person described their job as "pay me money you don't have to provide you preparation for events you don't believe will occur."  That is some job description.  But, of course, there are such jobs in a variety of walks of life that attempt to shield us from the downside of a variety of behaviors.

I was asked recently what I considered the 10 biggest threats to the future of liberty were, and the 10 biggest opportunities for the advance of liberty.  On the opportunities side, let me say that in my textbook with David Prychitko and Paul Heyne, The Economic Way of Thinking, we actually have a section making fun of a variety of famous people for their wildly off-the-mark predictions about future progress.  I am a Julian Simon type on this --- things are getting better all the time and the march toward greater freedom and prosperity is almost inevitable.  The key word there is "almost".

The way I see things, as long as Smithian gains from trade and Schumpeterian gains from innovation outpace statist stupidity, tomorrow's trough will be higher than today's peak.  We will not be as prosperous as we could have been, but we will be more prosperous than our parents and amazingly more prosperous than our grandparents.  However, there are times when statist stupidity can outpace Smithian gains from trade and Schumpeterian gains from innovation, and in those historical circumstances countries and their people are forced to live a miserable existence.  This was the problem in the Soviet Union, and it is the problem today in the poorest regions of Africa.  And, it could happen here in the US.  Bad ideas lead to bad policies lead to bad results.  Economics is not rocket science folks.

So what are the biggest threats?  I would argue that there are no threats to the future of liberty outside of the responses to events by government.  If government chooses to respond to an event by moving away from liberty in order to wrest more power in the name of the emergency, then the threat becomes real.  There are exogenous shocks to the system (e.g., 9/11) that require some response --- but it is the response, not the shock that has the potential to cause real damage to a society of free and responsible people.

So here is my tentative list of 5 shocks that could threaten our future IF the government chose to respond with more centralized power:

1. Terrorist attack on US soil.

2. Aging population and the financial promises that have been made which cannot realistically be met.

3. Bird Flu or some other disease that spreads easily between humans.

4. Severe weather changes (non-committal as to the cause, perhaps just due to natural variation in climate conditions as has been recorded in the past) that results in more and more declarations of emergencies.

5. Financial collapse of the US economy due to decades of excess credit.

Are these "black", "white" or "green" balls?

What others would you add to the list?  If we can list them does that mean they are no longer "green balls"?

Keep in mind that in the way I see things, exogenous shocks be they terrorism, disease, weather will only cause a lasting problem IF they are used as a excuse for increased statism.  Even endogenous problems like the financial promises made to our aging population, or the consequences of excess credit, can be addressed effectively if statism is restrained and voluntary means are employed to address the problem (both in the non-profit and for-profit sectors).

But when statism demands that liberty cede ground to power, economic deprivation and political tyranny are soon to follow.  And the sad reality is that the US is not immune to the problem of bad ideas leading to bad policies leading to bad results.

Comments

[Daniel J. D'Amico]

The assassination of JFK is always another one of those "where were you when it happened?" events. You can't watch a movie, read a book or even a make comment about 1960s culture or politics without paying it some lip service. But JFK's political climate was much different from ours. I'm not historically versed enough to make the claim that his death led to an expansion of political power.

Nonetheless I think a similar event today would result undoubtedly in an expansion of the state. Given today's charged political and the role of the president in guiding the war on terror, I think an assassination or even just an attempt would unify political efforts towards a program of expansion. It would also breed a new American nationalism in the hearts and minds of everyday people.

[Brian]

Economics might not be rocket science, but understanding the depth of our own biases can be.

[Brian]

Greatest threat: an apathetic, non-vigilant populous (and the generation that allows them to develop in such a way).

[Matt C.]

Just a comment to Daniel. Your assasination attempt already took place. Reagan's assasination attempt has led to more increased state control over guns and a loss to the people's right to carry a weapon. But Daniel's point is well taken. Robert Higgs writes:

"No one needs to wait twenty or thirty years, however, to understand how the government has exploited 9/11 at every turn to provide a knock-down justification of its irresponsible (and sometimes criminal) political, legal, military, and fiscal actions. For the Bush administration, no mistakes are ever made, because no matter what the government chooses to do and no matter how disastrously that action works out in practice, it is always alleged to rest on the same purportedly unimpeachable foundation—9/11."

http://www.independent.org/newsroom/article.asp?id=2023

A more successful assasination attempt would only push this further.

[cljo]

It was my last working for a "Beltway Bandit" defense contractor, coincidently. I was starting a job with the U.S. Department of Commerce trying to expand trade ties with the Middle East, also coincidently.

[cljo]

It was my last working for a "Beltway Bandit" defense contractor, coincidently. I was starting a job with the U.S. Department of Commerce trying to expand trade ties with the Middle East, also coincidently.

[G]

I think things are going to get worse before they get better. State intervention into the economy has been partially responsible for pushing jobs overseas, and the democrat's response to that might be protectionist legislation (which would, ironically, reduce American competitiveness even more).

The more I think about it, the more the democrat's reign could be really disastrous (although probably not worse than the republican's).

[Rolo Tomasi]

Economics is not rocket science folks.

This is so going into my Facebook favorite quotes.