Quotation of the Day…

by Don Boudreaux on April 19, 2020

in Complexity & Emergence, Curious Task, Hubris and humility, Prices, The Economy

… is from page 249 of George Will’s excellent 2019 book, The Conservative Sensibility:

Markets produce many things secondarily, from shoes to trucks to
novels, but primarily they produce information, in torrents that no
government is intelligent enough to comprehend or nimble enough to
respond to.

DBx: Indeed so.

And it’s worth pointing out again that economists have a coherent theory for explaining how markets elicit knowledge and distribute it to those who can use it most productively. In stark contrast, no one who proposes to replace or to override markets with taxes, tariffs, quotas, price controls, subsidies, or other state commands has any real theory whatsoever of how government officials will acquire and then use the knowledge necessary to bring about results superior to those that would otherwise be brought about by markets. The implicit ‘theory’ used by such people who advocate the replacement or overriding of markets is simply faith in government officials: faith that these officials will somehow know or learn enough to outperform markets.

When, for example, Oren Cass and Marco Rubio call for industrial policy to better ensure that we Americans specialize in producing outputs X and Y rather than A and B, they in fact have no way of knowing that their assertions  that we would thereby be made better off are correct. Of course, these advocates of industrial policy will list benefits that they believe we would all enjoy if we adopt their schemes. But even if they are correct in these assertions of benefits, advocates of industrial policy have no way of knowing the costs of their schemes.

The deep point here is not that it’s impossible that (say) industrial-policy advocates are correct. It’s not impossible. Rather, the deep point is that advocates of industrial policy specifically, and of replacing or overriding markets generally, have no theory of how government officials will obtain the knowledge necessary for their schemes to succeed. All they have is faith and assertions based on their faith.


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