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Quotation of the Day…

… is from page 158 of Deirdre McCloskey’s insight-filled 2019 book, Why Liberalism Works: How True Liberal Values Produce a Freer, More Equal, Prosperous World for All:

[Thomas] Piketty downplays the main reason that we are so much better off than our ancestors. The reason is not the character of distribution, but the ingenuity encouraged by letting people run their farms or their factories the way they want, taking the risk of failure and the rewards of success. We all agree that creative destruction is good in science and art and journalism and football, yes? Why not also in the economy?!

DBx: Here’s a simple, if ideologically unwelcome, reality: In a market economy wealth is created by human ingenuity, effort, risk-taking, and cooperation arranged by voluntary contracting – all within a competitive structure in which consumers are free to spend their incomes as they choose (implying that no producer has a right to consumer patronage). In this market order – the only system that has proven itself in practice as being able to sustainably enrich everyone, especially the masses of ordinary people – the only path to individual prosperity is to help others to achieve greater prosperity. And the more a person helps others to achieve greater prosperity, the greater is that person’s own prosperity.

Great fortunes earned in market economies are evidence not of negative- or zero-sum exploitation of others – not of unfairness – not of unsavory behavior – not of a ‘broken’ or unjust method of taxation – not of cronyism – not of anything other than the success of those who earn great fortunes to please to unusual degrees unusually large numbers of their fellow human beings. And so to discourage the earning of unusually large fortunes is to discourage people from being of unusually great service to their fellow human beings.

Many will think the above paragraph to be oh-so-bourgeois lame. “How predictable! How uncritical!” faux sophisticated folk – on the left and the right – exclaim. Yet I stand by it. Overwhelming support for the truth of the above paragraph is supplied by economic history. The great wealth of Rockefeller, of Swift, of Carnegie, of Ford, of Kroc, of Walton, of Jobs, of Gates, of Winfrey, of Bezos, of Zuckerberg, of you-name-the-person-who-became-fabulously rich in the market was earned; it was, indeed, created by them. And the typical among them, at least if the second half of U.S. history is any guide, was obliged by market competition to enrich his or her fellow human beings to the tune of about 45 times more than that entrepreneur enriched himself or herself.

Hostility to such entrepreneurship and to the lures that encourage it, and to the price and profit signals that direct it, come from children, fools, sociopaths, and tyrants. Informed, well-meaning, civilized adults applaud such entrepreneurship and do not succumb to the destructive (personally and socially) sentiments of envy and covetousness of what belongs to others.

Oh, and by the way to all of you who have a warm spot for the false promises of industrial policy: the success of none of the entrepreneurs mentioned above – nor the products and economic processes they helped to make possible – was the result of government design or policy.