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Quotation of the Day…

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… is from pages 308-309 of Deirdre McCloskey’s excellent 2019 volume, Why Liberalism Works: How True Liberal Values Produce a Freer, More Equal, Prosperous World for All [2]:

The High Liberal story is, in a few brief mottos to stand for a rich intellectual tradition since the 1880s: Modern life is complicated, and so we need government to regulate. Since markets fail very frequently, the government should step in to fix them. Government can do the regulation well, and will not be regularly incompetent or regularly corrupted. Without a big government we cannot do certain noble things (the interstates, NASA, poor relief). Antitrust works. The big danger is not big government armed with guns but big business business armed with business plans….

To all this, in the words of the little boy protesting in his high chair in the classic New Yorker cartoon, I say it’s spinach, and I say to hell with it. The master narrative of High Liberalism is factually mistaken. Externalities do not imply that a government can do better…. Efficiency is not the chief merit of a market economy – bettering is, a matter of innovation over time.

DBx: Yes – or as is now in vogue to say, “This!”

It’s child’s play to describe how externalities will arise here and some other ‘market failures’ will frustrate, impoverish, or even kill people there. Chalkboards in the past were, just as white boards and PowerPoint documents today are, stuffed with such demonstrations, all beautiful in their rigor yet few actually tested to see not only if and how applicable such theoretical demonstrations are to reality, but also to see if attempts by the state to ‘correct’ such market ‘failures’ are practically likely to work as advertised.

It’s a professional scandal how routinely economists (most of whom know no, or know only potted, economic history) – upon assuming without much critical thought that information asymmetries, moral hazard, free-riding problems, and other market ‘imperfections’ are dangerously commonplace in real-world markets – utterly ignore the possibility that information asymmetries, moral hazard, free-riding problems, and other such imperfections prevent political decision-makers from intervening in the productive ways that so many professors and pundits imagine.

Also unfortunate, if not quite scandalous, is the widespread view amongst economists that the economy is a mechanism to be optimized and whose optimal arrangement is defined independently – and, hence, can be discovered independently – of the actual market processes that create the order that we call ‘the economy.’ Most economists have still to learn one of the deepest lessons taught by Adam Smith: the economy is not an organization such as a firm or a club or even a government. It is, instead, an astonishingly complex order that is “defined in the process of its emergence [3].”

These realities, amongst others, are lost on those who fancy that the state is likely to improve matters with tariffs, subsidies, industrial policy, or socialism grosse or petit.

….

The image above is of the steamship SS Arctic, built in 1850 for Edward Collins – an American crony capitalist heavily subsidized by the U.S. government. The Arctic collided in 1854 with the French steamer, the SS Vesta. Many died [4]. Anyone entranced by tales of the wonders of government industrial policy should read Burt Folsom’s history of the U.S. government’s infatuation with Collins [5].

…..

An earlier version of the chapter from which the above McCloskey quotation is drawn is here [6].

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