What Would Have Happened If the Government Had Done Nothing

Abstract

The previous chapter argued that it is impossible to estimate the effects of government policies to raise employment and income without having some sort of idea of what levels of employment or income would have occurred in the absence of government intervention. This implies using some sort of mathematical model to calculate the levels of employment or income that would have occurred purely from market forces. Because most studies of the effects of state intervention in the economy do not make such adjustments, it is often difficult to know if the policies being discussed were successful or not — unless the results are very extreme. Examining the state’s capacity to improve economic conditions above those levels that would have been expected from market forces is a more rigorous test of state capacity than the mere capacity to seemingly raise employment over time. Such a test is necessarily a stronger test and provides a more robust confirmation of the value of state interventions than does the more traditional “post hoc ergo propter hoc”.