American Decline

The Inherently Inefficient Union

By Ally Marie McLean

When it comes to efficiently allocating resources, the United States federal government usually gets in the way. In his article “The Use of Knowledge in Society,” F.A. Hayek argued that the smaller and less centralized organizations are, the more efficient their economic activity will be. This is because in a sprawling, centralized organization, central planners only have limited knowledge of the information available to the individuals they are in charge of. There is usually a wealth of knowledge available to those who take orders which is relevant to doing things in an efficient manner. However, since knowledge must be relayed to those in command in order for decisions to be made about how to use the available resources based on the available knowledge, things are not done as efficiently by the large, centralized organization as they would be done by smaller organizations. Cookie cutter solutions to the problem of resource allocation are bound to be inefficient, and they are the inevitable fate of the centrally planned institution. Since the knowledge available to those taking orders can not all be put to use by those giving orders, sprawling institutions are bound to be grossly inefficient. This is what we call the “knowledge problem.”

Originally intended as an argument against socialism in favor of free markets, the knowledge problem also gives us good reason to abandon the central planning of the United States federal government in favor of state government sovereignty. That is to say, the knowledge problem makes secession an imperative for anyone wanting government that is more efficient and less wasteful. The issue here is serious: as long as the Union remains united as a superstate, economic decisions made by this superstate will be totally inefficient compared to the decisions which could be made by sovereign states, were the Union to be dissolved. There are economic and ecological issues caused by this problem, as well as some issues brought about by the inherent inefficiency of the Union which libertarians in particular might take issue with. Put simply, state governments know more about how to efficiently allocate resources in their states than the federal government does. The federal government is too far removed from the ground floor, so to speak, to make anything resembling efficient decisions regarding resource allocation. The knowledge problem is a big part of what has made state communist regimes like the USSR abject failures economically, and one thing which has led them to tend to adopt some market mechanisms as components of their economies. Were it not for America’s use of markets, the American economy would be incredibly inefficient, more than it already is. But that’s the thing- it already is. Due to the centralization of a great deal of decision-making power, including a lot of economic decision-making, in the hands of the federal government and its central planners, the Union is incredibly inefficient. Were state governments free to manage the affairs of their states as they see fit, this inefficiency would be eliminated, and the states currently making up the United States would reach new heights in terms of prosperity and economic advancement.


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