To get through the current crisis, Jared Bernstein argues, we must look to Keynes. It is an old argument, reapplied to our current context. The old argument is straightforward: the free market cannot fix itself. It follows, then, that we should not expect the economy to automatically recover once the pandemic outbreak is over. A more effective approach, Bernstein and others following in the tradition of Keynes maintain, would see the market managed by the savvy hand of the state.
Yet, how precisely the state should manage the economy is unclear. And the idea that capitalism is “not to be overthrown but to be ‘wisely managed’” is a dangerous one.
As Friedrich A. Hayek explained in a famous 1945 essay on The Use of Knowledge in Society, governments are unable to acquire the requisite knowledge to allocate resources effectively. The knowledge required is decentralized–of a particular time and place. Indeed, it is often tacit, meaning it cannot even be articulated by those possessing it.