Look to the Long Run

by Mario Rizzo

I have been away in France for almost two weeks. I missed the “earthquake” and Hurricane Irene for I which am very happy.

What being away reminds me is that if you follow the day-to-day news you can easily get bogged down in the small events — though they seem big and important at the time — and fail to see the bigger picture. Every little nervous twitch by the those in power becomes our daily obesession.

Blogs contribute to this because you must make your comment right away because the public attention moves to something else. But if there is any lesson to be learned from classical liberalism is that we ought to focus on the long run. It is really only the long run that we have any hope to change. Most of the propositions of economics apply to the long run — as Milton Friedman taught “fine tuning” is a fool’s errand. What we know about the institutions conducive to the free society and to prosperity apply mainly in the long run.

This the both the strength and the weeakness of the liberal doctrine. People demand short-run solutions but there are only long-run answers. This is why government needs to be constrained to a long-run focus. It is also why it can never be constrained permanently and why the struggle for economic progress and freedom is eternal.

“Enjoy” the daily news but don’t mistake it for something important. It generally is not.

Now which newspaper would hire me with that philosophy?

2 thoughts on “Look to the Long Run

  1. Mario is correct, of course.

    Hayek argued against discretionary monetary policy because of the very knowledge problems he raised in the socialist calculation debate.

    Friedman’s argument on the lags in monetary policy is a straight-forward extension of Hayek. That does not diminish Friedman. He filled in and extended what Hayek only presented in outline form. But the traditional monetarist position on discretionary monetary policy is as skeptical as the Hayekian view.

    Both believed in a monetary rule, but never agreed on what the rule should be. “Do nothing” follows from adherence to a rule, hwoever, and is what Friedman and Hayek have most in common in monetary theory.

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