TCS Daily


Maybe Clarke and Rice Are Both Right

By David R. Henderson - May 14, 2004 12:00 AM

"Your government failed you, those entrusted with protecting you failed you, and I failed you." -- --- Richard Clarke, March 25

"The problem is that the United States [government] was effectively blind to what was about to happen."
-- Condoleeza Rice, April 8

Who's right? Is Richard Clarke right that he and the rest of the government failed the victims of September 11? Or is Condoleeza Rice right that the government could have done little to prevent 9/11? Actually, they're both right. The reason comes from the economic thinking of Nobel economist Friedrich Hayek, the man who pounded the final intellectual nail in socialism's coffin. And on 9/11 there were two pieces of evidence that there's a better way than trusting our security to centralized planners, evidence that was hidden in plain sight.

Central economic planning can't work, explained Hayek, because no small number of people at the top, however brilliant or informed, can aggregate all the trillions of pieces of data needed to plan an economy well. The main information that matters in real time is what Hayek called "knowledge of particular circumstances of time and place" and this information is necessarily decentralized: it exists only fleetingly in the minds of millions of people. Forbid people from acting on their information, argued Hayek, and the information won't be used. That, plus lack of incentives, is why crops rotted while waiting for railway cars and why the wrong sizes and types of steel were produced regularly in the Soviet economy. In a free-market economy, by contrast, people have both the incentive and the ability to use their information. For instance, the shipper who earns his living by using otherwise empty or half-filled journeys of tramp steamers is performing a useful function based on special fleeting knowledge not known to others.

Hayek's argument applies whether the good being produced is food, steel, or internal security. In fact, in her testimony before the 9/11 Commission, Dr. Rice explained the problems with centralization eloquently;

You have thousands of pieces of information . . . and you have to depend to a certain degree on the intelligence agencies to tell you what is actually relevant, what is actually based on sound sources, what is speculative.

Dr. Rice is right. How are she and her colleagues to decide in advance which threats are real and which are not? They could treat all threats as real and then clamp down on border crossings and other largely peaceful activities. That would quickly change the United States into a police state, something that not even the police want.

Does this mean the situation is hopeless? Not at all. Because we [decentralized Hayekian actors] are actually pretty good at taking care of much of our own safety-and we even spring occasionally to create safety for others.

Think of two good things that happened on that horrible September 11. The first was the actions of the heroic passengers on United Flight #93. They got information about the hijackers' true intentions, not by waiting for some central government announcement, but by acting in the moment to get information from friends and loved ones. They quickly figured out that they would not be on a free trip to Cuba, but on a one-way trip, probably to a high-value target in Washington. So, with little to lose, they acted to protect the lives of strangers in Washington. And they succeeded.

The second good thing was a centralized agency, the FAA, letting its air traffic controllers figure out, in a decentralized way, how to bring a few thousand planes down safely in a few hours. As USA Today reported (August 13, 2002), after 9/11, the FAA started to write a manual for clearing the skies so they could have a more organized plan the next time. Then it stopped. FAA officials realized that they couldn't plan for the next time because the situation would be different. Instead, the FAA would have to trust that hundreds of air traffic controllers would cooperate the next time as they did so well on that awful day.


A centralized government agency can't be the main body entrusted to protect us. Because it must sift through too much data, almost all of which will turn out to be benign, it moves too slowly. That was Dr. Rice's insight even if she didn't dare state it quite so bluntly. The government failed to protect us-that was Mr. Clarke's insight stated bluntly. So let's protect ourselves.

Let's allow airlines to decide whether to let their pilots carry guns, as they were free to do before 1987. Pilots are now allowed to carry guns, but only if they give the government intimate details about their personal lives. If airlines want to man their flights with armed, retired FBI agents, as one major airline wanted to do until the FAA nixed it, they should be free to do so. And the government should allow other precautions that are too numerous to list in this short space. The lesson of September 11 is not that government should plan better and not that a Republican president plans better or worse than a Democrat president. The lesson of 9/11 is that central planning doesn't work and that government should not get in the way of our planning.

David R. Henderson, a research fellow with the Hoover Institution and an economics professor at the Naval Postgraduate School in Monterey, California, is author of The Joy of Freedom: An Economist's Odyssey (Financial Times Prentice Hall 2002). He was formerly a senior economist with President Reagan's Council of Economic Advisers. He can be reached at drhend@mbay.net.


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