October 15, 2013

Lawrence White Explains Hayek's View on Handling Recessions

Lawrence H. White

Distinguished Senior Fellow, F. A. Hayek Program for Advanced Study in Philosophy, Politics and Economics

When economic troubles strike, policymakers are eager to do something to try to help the citizenry. In this Learn Liberty video, Prof. Lawrence H. White argues that government doesn't necessarily know how to relieve economic woes, and in fact, often wastes and mismanages resources. Individuals in the market know better what they need in their circumstances, as economist Friedrich Hayek argued during the Great Depression. Relying on government to fix our economic woes instead of allowing individuals to make decisions for themselves means putting all of our eggs in one basket. Individual decisions in the market won't be mistake-free, but each individual mistake will be smaller and will correct more quickly. The unusually slow and painful recovery that we have seen in this recession point to problems with the "government should do something" view. What do you think might be the best way to handle economic difficulties? Why?