The Surprising Answer for How to Handle the Next Recession

When economic troubles strike, policymakers are eager to do something to try to help the citizenry. But 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.