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Quotation of the Day…

… is from page 404 of Benjamin Rogge’s 1955 paper “The Role of Government in Latin American Development,” as this paper is reprinted in A Maverick’s Defense of Freedom, the 2010 collection of Rogge’s essays that is edited by Dwight Lee:

The unique feature of the free market system is that it “plans” the use of resources without any one person or group needing to have knowledge of either the total process or of the goals that are to be served.

It is particularly difficult for government action to be based on adequate knowledge of the “goals” of the individuals who make up the society – to know how much to sacrifice of present consumption goods the people are willing to make to permit an increased production of capital goods, for example. For this reason, much “planned” economic development has been authoritarian  in form (even in democratic societies), with the “goals’ imposed from above.

DBx: All calls for government planning of the economy – all calls for planning from that of full-on socialism to the again-now-absurdly trending “industrial policy” – are calls to reject the relevance and use of the vast amounts of information and knowledge that are had, and can be had only, by individuals on the spot and free to use that information and knowledge as each perceives to be best.

Because the amount of information and knowledge that can be gathered, processed, and acted on by central planners, or by designers of industrial policy, is an infinitesimal fraction of the amount of information and knowledge that is put to use in markets, to endorse central planning or industrial policy is to endorse the substitution of ignorance for that of intelligence.

Advocates of socialism and advocates of industrial policy are religious dogmatists. Their arguments for replacing decentralized markets with direction from above by a powerful (and assumed-benevolent) economic creator and directing higher power are weak and motivated, and their evidence for the superiority of their economic creationism over the spontaneous forces of free markets is non-existent. Yet while these advocates are motivated by the fire of their sincere faith, the rest of us shouldn’t fall for it, for it’s nonsense.