Quotation of the Day…

by Don Boudreaux on August 2, 2016

in Hayek, Hubris and humility, Man of System, Prices, Taxes

… is from page 184 of Deirdre McCloskey’s 2006 volume, The Bourgeois Virtues (footnote deleted; links added; ellipses and bracketed word are original to McCloskey):

And Rabbi Jonathan Sacks (since the point is not merely Christian) wrote in 2002, “Truth on the ground is multiple, partial…..  Each person, culture and language has part of it….  The [Jewish] sages said, ‘Who is wise?  One who learns from all men.'”

At least one modern and popular religion rejects this wisdom; that religion is Statism.  He who believes, for example, that there is one ‘true’ minimum appropriate wage for a group of people rather than one appropriate wage for each individual given each individual’s unique circumstances and preferences is arrogant and pretentious in his ignorance.  She who is sure that unleashing the military of government A to oust the government of country B will improve the lives of citizens of B and make them grateful to the people of A is arrogant and pretentious in her ignorance.

The single greatest institution that encourages and enables each of us to ‘learn from all men’ is the market’s price system.  This reality is described and celebrated in F.A. Hayek’s most famous article, “The Use of Knowledge in Society.”  This system gathers information and knowledge from each market participant and relies upon competition to process these scattered and dispersed bits of information and knowledge into the summary statistics called “market prices.”  The grade of plywood whose price is twice that of some other grade of plywood tells the world that the value of the resources used to produce the former grade is about twice the value of the resources used to produce the latter grade.  So use the former grade with more care and consideration than you use the latter grade.

Interferences with the pricing mechanism spread lies and misinformation.  Price and wage ceilings, and price and wage floors, forcibly prevent us from communicating with each other as fully and as honestly as we otherwise would.  Taxes and tariffs, though usually not as damaging as are price ceilings and floors, add disruptive noise to the information conveyed by market prices.

All government interferences with market prices interfere with our ability to learn from each other.

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