≡ Menu

Quotation of the Day…

… is from page 185 of the Mercatus Center’s 2016 re-issue of my late colleague Don Lavoie’s brilliant 1985 volume National Economic Planning: What Is Left?:

But the first principle of any analysis of the capital structure has to be the clear recognition of the fact that, unlike a physical structure such as a building, it is continually changing. Its parts are forever adjusting to one another the basis of profit. Profit and loss signals are the only information that can guide producers of higher-order capital goods toward the production of the kinds of intermediate goods that will contribute to the production of lower-order consumption goods. This intricate network of relations among the thousands of orders and sectors of capital goods is continually being restructured by the factors set in motion by differential profit rates. Thus, a call for governmental restructuring or shoring up of this self-ordering system amounts to a destruction of the very mechanism that tends to keep the sectors of the capital structure integrated.

DBx: In short: to the extent to which a government puts the economy under an industrial policy it obstructs and distorts the elicitation and sharing of information necessary not only to enable that economy to become more productive but even to maintain its current level of productivity.

The fatal conceit of supposing that the spontaneously ordered processes of human interaction can be replaced to better effect by conscious direction arises in many different particular contexts. Today, people on the political left are increasingly joined by people on the political right in arrogantly (and ignorantly) believing that they – or agents whom they are willing to trust – are smart enough, informed enough, and politically courageous enough to survey in detail a reality that is too vast for any human being to comprehend and then to coercively intervene into that reality in ways that will ensure that it will turn out better than it would if left to its own devices – that is, than if left to the devices of millions of individuals spending their own money and guided by their own unique access to information.

To those of you on the political right, I ask if you trust the likes of Bernie Sanders, Elizabeth Warren, Joe Biden, or Michael Bloomberg to so improve the economy. To those of you on the political left, I ask if you trust the likes of Donald Trump, Mike Pence, Wilbur Ross, or Marco Rubio to so improve the economy. And to everyone I repeat this reality: industrial policy will not be designed or carried out by hyper-informed heavenly angels but by poorly informed political agents. It is beyond me why anyone supposes that these agents are sufficiently trustworthy to deserve the privilege of superintending and overriding our individual economic choices.

The photo above is of a sugar-cane field in Florida – proof positive that the likes of Marco Rubio are not to be trusted to carryout or to oversee industrial policy. Rubio has a long record of supporting, for political reasons, inefficient uses of resources such as the use of land and other resources in the U.S. to produce sugar. Industrial policy would simply uncork more such inefficiencies, all sold with lies to the American public as ingenious schemes to make us richer.