Quotation of the Day…

by Don Boudreaux on April 19, 2014

in Crony Capitalism, Hubris and humility, Man of System, Reality Is Not Optional

… is from page 168 of 2006 Nobel laureate Edmund Phelps’s 2013 book, Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change; in this passage Phelps discusses “corporatist” economic and political notions that dominated continental Europe for much of the 20th century (and that continue to this day to influence policy there; original emphasis):

The corporatist system was idealized as having dispensed with individualism and competition, which were demonized as ugly and inhuman.  But the system merely transplanted individualism from the market to the state, where individuals would elbow their way to increased power.  The system would end competition among producers for the many buyers in the market.  But it replaced that with the insidious competition of producers and professionals for a share of government contracts and a place in government-sponsored enterprises – for a single, all-powerful buyer.  The system was idealized as having put an end to the conflict between capital and labor, but in the end the postwar system simply conferred large monopoly power to unions as well as large employers, thus licensing both of them to contract output.  The system was portrayed as restoring the balance between materialism and high culture, but the system then undermined most of the great literature and art because they were individualistic.  The system was extolled as scientific in contrast to the chaos of the modern system it replaced.  But the system would replace uncertainty about what the myriad would-be innovators were up to with uncertainty about the outcome of the state’s attempts at innovation.  That might create more uncertainty than before.  The corporatist demonized the power the the modern economy conferred on the industrial mogul of financial speculator who became rich, portraying their new system as a servant of society as a whole.  But their system concentrated far greater power in the hands of political moguls and their financial backers.

Yep.  Regardless of the particular political stance of those who would replace private-property market institutions and processes with government-issued commands, constraints, and subsidies, they all – all of the champions of greater government power – rely upon the “Then a miracle occurs” step in their formula for improving reality.  This fact is true even for those champions of greater government power who fancy themselves to be especially scientific and objective.  They mistake their blackboard (or computer-generated) descriptions of what is possible as being descriptions of what is plausible or even probable for reality.  They seldom bother to use much genuine science to analyze and to better understand the actual role and effects of politics and the nature of government.

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