A reader picks up the Gresham’s Law posting below and links to this speech in 1974 by Nobel Prize-winner Friedrich Hayek: The Pretence of Knowledge.

Magnificent analysis, all about how we deal with the fact that it is hard to make wise (and prescriptive) policy on the basis of what we can’t really measure:

…the social sciences, like much of biology but unlike most fields of the physical sciences, have to deal with structures of essential complexity, i.e., with structures whose characteristic properties can be exhibited only by models made up of relatively large numbers of variables. Competition, for instance, is a process which will produce certain results only if it proceeds among a fairly large number of acting persons.

Here is some advice from 1974 to today’s EU governments as they strut and fret their way through the financial crisis and try to Save the Planet through ever greater regulation/control:

If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible.

He will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants.

There is danger in the exuberant feeling of ever-growing power which the advance of the physical sciences has engendered and which tempts man to try, "dizzy with success," to use a characteristic phrase of early communism, to subject not only our natural but also our human environment to the control of a human will.

The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men’s fatal striving to control society — a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.

What do we get in 2008?

Tyranny edging up as the state (national and EU combined) blunders about trying to control everything.

Humility? Nowhere to be seen.

We seem to going back not to Hayek’s 1974 masterpiece but to other phenomena from the 1970s which were far less honest.