Thursday, 1 March 2012

STOP PRESS Scientist announces results of experiment without using a control group

A recent article in The Conversation has me wondering what Linda Weiss did to become a scientist. She argues that all economies benefit from the interaction of the State, and that some how the evidence for this is that all contries have experienced government interference in their economy:
State “guidance” of the economy, in the broadest sense, is the shared history of all countries that have successfully industrialised.
... It is not that one set of countries practise “free-market capitalism” while another set practise “state-guided capitalism”. It is closer to the truth to point to the differing ways in which all economies – whether emerging or advanced – draw on state involvement in guiding and shaping development. It is recognition of this point that is long overdue in mainstream economic and political thinking.
... it has been the rapid rise of China and other emerging giants, India and Brazil – the so-called BICs — that has done more to challenge the Washington Consensus idea that state activism is always inimical to economic prosperity.
So, all countries have experienced state guidance of industry, their industry has grown, and this means that state guidance is a good thing. That's like saying that all people die, people are a good thing, therefore death is a good thing. All cats have four legs; my dog has four legs, therefore my dog is a cat.

I hope that by now you are getting the picture: she has taken a sample of all cubes and says there's no such thing as a circle. You must have a control group in any experiment - in this case it would involve looking at economies that were not controlled by the state. Since no such economy has ever lasted long, at least not recently, we have no data on that front. However, the Adam Smith Institute has an article that examines the next best thing - plotting economic prosperity against state interference in the economy, and it tells a rather different story:
As you can see there is definitely a correlation there, and it doesn't come down in favour of state interference. I'm not going to call that a clinching argument - clearly there are other factors at play since for a freedom rating of 7, for example, there is a wide variance of GDP per capita, but it strongly supports the case that government interference is killing the economy, not helping it.

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