Saturday, May 05, 2007

Poverty may fall in half in the next ten years even if we do not enact any of the recommendations of this task force. In fact, a reasonable guess is that the recommendations themselves would, if anything, slow the rate of progress against poverty.

The point of this essay is to simply state the obvious. If you look at poverty from the broad perspective of international and historical comparisons, the solution to poverty is decentralized entrepreneurial activity under capitalism.

The capitalist solution to poverty is unsatisfying to many people, because it is not planned or intended. Policymakers and anti-poverty programs per se are not involved.

The phenomenon of unplanned results exceeding planned outcomes is quite widespread. As Nassim Taleb points out in his new book The Black Swan, and in this fascinating interview, human planning tends to work poorly when compared to trial and error. He argues, for example, that many medical discoveries are serendipitous, while systematic efforts such as those of the National Cancer Institute often yield disappointing results.

In Hayekian terms, we say that order emerges, and often this order has little to do with the intentions of planners.
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