Why detailed macroeconomic management doesn't work

This applies both to that archaic idea of precise Keynesian demand management and also the more recent Modern Monetary Theory. They don’t work because:

Official figures have confirmed the UK economy went into recession at the end of last year, after the latest estimate found it had contracted in the last two quarters of 2023.

In a blow to the government’s economic standing, the Office for National Statistics (ONS) said the economy, measured by gross domestic product (GDP) shrank by 0.3% in the last three months of the year, unrevised from an earlier estimate.

That archaic Keynesianism would suggest that back this time last year - about - the government should have increased the deficit. Spent more - easy enough - or reduced taxation - Hah! - in order to use fiscal policy to boost the economy. MMT has a slightly different prescription, keep printing money until the economy runs hot then tax back the excess money creation causing any inflation.

We’ve now the reliable figures giving us the policy we should have followed a year after whatever it is we should have done. That means that the GDP figures cannot be used as a guide to policy, obviously - we’ve not a time machine to go back and change policy now that we know, do we?

Hayek wins again that is. We simply do not gather information in time and in detail sufficient to be able to manage the economy in any detail.

Yes, obviously, 10% changes in GDP - in either direction - mean action should be taken and we’d have other guides to that happening other than these GDP figures too. But given that Hayek does win again we’ve simply not the information flow to be able to follow that dream of that detailed macroeconomic management.

This leaves us with getting the microeconomics right - incentives and so on - and then seeing what happens. Which is, as we’ve long said, about the only form of economic planning we can do that actually works.