Fatal Conceit

Our Financial Secretary Henry Tang is always funny, he never fails to entertain. Here is the last installment:

Reporter: Many economists say there is room for marginal tax cuts for the Hong Kong Government, ... everything is turning fine and we don't expect there will be a huge deficit, how well do you agree with them?

Financial Secretary: We must not be too shortsighted. I know while Hong Kong is recovering and is enjoying a fairly robust economic growth, hopefully and likely for a second consecutive year, but we must take a broader perspective and be more macro in terms of what are the external economic factors that may affect us, what are the internal structural healthiness of our economy, and thirdly how to address some of the wishes of our people. I think I will have to address the need of the people and at the same time take a prudent financial management approach. So I will have to strike a balance and I will announce whatever measures I have on February 22.

Read the whole thing here.

What's funny about his answer? Well, he mentioned that the government "must take a broader perspective and be more macro in terms of what are the external economic factors that may affect us..."

The fact is NEITHER him nor anyone, I mean no one, in the government will be able to figure out what the Financial Secretary claimed that could be done in that passage quoted above. Indeed, even individual market participant who is in a far better position to learn about the market conditions than government officials does not have access to that kind of knowledge mentioned in the Financial Secretary's quote. Hayek mentioned back in 1945 that knoweldge is dispersed and the very existence of the market is to help us solve the dispersed knowledge problem effectively.


Another funny thing about his answer is this, in the quote above he said "and thirdly how to address some of the wishes of our people." Why Hong Kong people's wishes need to be addressed by him, why can't they figure it all out all by themselves? Afterall, they are not his children and why we need him to take care of them?

Why a government with a dollar in its hand (extracted through taxation) can figure out a better way to satisfy a person's wishes (from which the dollar is taken through taxation) than a dollar in his/her own wallet? How does the government find out what the person wants?