Quote of the Day: Why you don't need equations to understand economics

Stripped of his numbers an economist would have to resort to the old home truths about how the world works: If you tax something you get less of it; as a general rule an individual manages his own affairs better than his neighbor can; it's rude to be bossy; the number of problems that resolve themselves if only you wait long enough is far larger than the number of problems solved by mucking around in them. And the cure is often worse than the disease:

In the long run, the aggregate of the decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is likely to do less harm than the centralized decisions of a Government; and certainly the harm is likely to be counteracted faster.

Somehow the most successful practical economist of the twentieth century knew this was true, and he didn't have to work out a single equation.

This is from Weekly Standard’s Senior Editor Andrew Ferguson published at the Wall Street Journal Notable & Quotable section. (hat tip Prof John Cochran at the Mises Blog)

Mr. Ferguson proposes that the Federal Chairman Janet Yellen adapt a John Cowperthwaite paradigm. Mr. Cowperthwaite has been largely credited for the economic success story of Hong Kong via free markets.

The point of the above isn’t entirely to shun or scorn statistics but to know of its fundamental limitations and the perils of relying on them to solve social problems. Obsessing over statistics has mostly been the handiwork of scheming interventionists, as well as, knowledge pretenders in pursuit of the social desirability bias

Quote of the Day: The Key Thing Poor Countries Should Do

In a eulogy to Sir John James Cowperthwaite, a British civil servant and the Financial Secretary of Hong Kong from 1961 to 1971, the quebecoislibre.org wrote (hat tip Bob Wenzel)

Asked what is the key thing poor countries should do, Cowperthwaite once remarked: "They should abolish the Office of National Statistics." In Hong Kong, he refused to collect all but the most superficial statistics, believing that statistics were dangerous: they would led the state to to fiddle about remedying perceived ills, simultaneously hindering the ability of the market economy to work. This caused consternation in Whitehall: a delegation of civil servants were sent to Hong Kong to find out why employment statistics were not being collected; Cowperthwaite literally sent them home on the next plane back.

Cowperthwaite's frugality with taxpayers' money extended to himself. He was offered funds from the Hong Kong Executive to do a much needed upgrade to his official residence, but refused pointing out that since others in Hong Kong did not receive that sort of benefit, he did not see why he should.

Cowperthwaite's hands off approach, and rejection of the in vogue economic theory, meant he was in daily battle against Whitehall and Westminster. The British government insisted on higher income tax in Singapore; when they told Hong Kong to do the same, Cowperthwaite refused. He was an opponent of giving special benefits to business: when a group of businessmen asked him to provide funds for tunnel across Hong Kong harbour, he argued that if it made economic sense, the private sector would come in and pay for it. It was built privately. His economic instincts were revealed in his first speech as Financial Secretary: "In the long run, the aggregate of decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is less likely to do harm than the centralised decisions of a government, and certainly the harm is likely to be counteracted faster."

Mr. Cowperthwaite’s contribution deserves even more credit. According to the Guardian

His example inspired the governments of Margaret Thatcher and Ronald Reagan, and was a key influence in China's economic liberalisation after the demise of Mao Zedong.

I add to my list of underrated and unsung heroes of capitalism Sir John James Cowperthwaite.