Here’s a letter to someone who chalks up my opposition to industrial policy to my being “ideologically hidebound”:
Mr. or Ms. “Temperans”:
You write that my opposition to industrial policy “won’t be taken seriously by anyone of any count” because this opposition “only reflects the extremist radical fringe which is Geo. Mason’s economics school.”
Hmmm…. I wonder if you can tell me which of my extremist radical fringe GMU Econ colleagues penned this warning against government efforts to pick industrial winners:
The trades, it is to be observed, which are carried on by means of bounties [that is, subsidies], are the only ones which can be carried on between two nations for any considerable time together, in such a manner as that one of them shall always and regularly lose, or sell its goods for less than it really costs to send them to market. But if the bounty did not repay to the merchant what he would otherwise lose upon the price of his goods, his own interest would soon oblige him to employ his stock in another way, or to find out a trade in which the price of the goods would replace to him, with the ordinary profit, the capital employment in sending them to market. The effect of bounties, like that of all the other expedients of the mercantile system, can only be to force the trade of a country into a channel much less advantageous than that in which it would naturally run of its own accord.
Was it Walter Williams? How about Pete Boettke? Or Chris Coyne? Bryan Caplan? Tyler Cowen? Dan Houser? Dan Klein? Pete Leeson? David Levy? Tom Rustici? Virgil Storr? Alex Tabarrok? Dick Wagner? Larry White? Perhaps some other GMU Econ colleague of mine? Or maybe this expression of opposition to governmental attempts to determine the pattern of production and trade was offered by one of my colleagues at George Mason’s Mercatus Center – someone such as Veronique de Rugy, Dan Griswold, Matt Mitchell, or Adam Thierer?
Give up? In fact, this brief against what we today call industrial policy was written by that well-known radical fringe figure Adam Smith. In 1776.
You can find it on page 506 of the 1981 Liberty Fund edition of his An Inquiry Into the Nature and Causes of the Wealth of Nations. It’s a wonderful book. I recommend it. Highly. Very highly.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
