Certainly it makes sense to frame the question this way, because much of our economy - just as the title of this blog suggests - ends up getting "planned" to some extent by someone, even in a supposedly free market society. If some degree of planning is inevitable, the very least anyone can do is leave room for good incentives and outcomes for all concerned. When that doesn't happen, everyone ends up instead with ad hoc and rigid results which - as Timothy Taylor indicated - are more about what happens at Pennsylvania Ave. and K St, rather than Main Street and Wall Street.
While this post is strictly one disgruntled opinion (heh), there happens to be a tie for "first place", as to the biggest economic mistake of the present. For one thing, a lack of real social and economic connections has resulted in needless isolation at all levels of society. To be sure, plenty of folk mostly want to be left alone and have the economic means to ensure this is possible. But others want the chance to meaningfully interact in their communities through the course of their lifetimes. Not only is there too little local coordination for services in many areas, default settings for these unfortunate circumstance tend to be both expensive and crisis oriented.
So why a blogpost such as this? Perhaps it is the result of a near sleepless night. I almost have to wonder if Tyler Cowen had a sleepless night after his musings, regarding what some may consider the "second place" (biggest) economic mistake. He asked, "How will we know if the ACA is working?" because he has not been very happy with the answers so far from either side. To be sure, Obamacare would probably rank as the first choice headache inducer, for some. While I agree that Obamacare was a tremendous mistake, I have to remind myself that this latest atrocity was built on the back of a healthcare system which had already incinerated vast quantities of services potential.
What is the first place "tie" for biggest mistake? It is the refusal of the Fed to acknowledge the human component of monetary policy, which is why they are too eager to stray from aggregate spending capacity when it serves their purposes to do so. It's quite reasonable to suggest that central bankers have contributed to the despair and worry, which so many face in the present. Money and the workings of the economy are supposed to represent people and their aspirations. Yet too many on both the left and the right, remain convinced that this is not the case.
Many individuals do not recognize the real dangers of ending up isolated, until they find themselves in this predicament. Once involuntary isolation happens, it's not always an easy place to walk back from - particularly the older one gets. However in the present, it is not just older individuals who find themselves with too few economic - thus social options. Increasingly, a lack of access to work and job possibilities can happen at any age, particularly when people are in relatively isolated areas.
Even though many mistakes represent supply side problems which are the responsibility of citizens, the right monetary factors need to be in place before economic circumstances can improve. Central bankers need to focus on what they can actually accomplish, rather than constantly fretting about things which are not theirs to worry about. Worse, worrying about the wrong things makes it too easy for those who really need to tend to supply side issues, to continue ignoring them.
Central bankers have a long way to go, before they can restore public trust in their institution. By refusing to act sensibly, they also make it more difficult for other factions to trust one another in economic relationships. Policy makers need to do their part and adhere to a nominal level target rule for spending capacity, so that it becomes possible to face up to other economic mistakes of the present. After all, central bankers still have an element of control. But if they do not utilize their (actual) monetary capacity properly while the opportunity remains, it becomes more difficult to control the winds of political change once they are set into motion.
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