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Quotation of the Day…

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… is from page 60 of the May 9th, 2020, draft of the forthcoming monograph from Deirdre McCloskey and Alberto Mingardi, The Illiberal and Anti-Entrepreneurial State of Mariana Mazzucato:

Driving across town to the Exact Perfection Store, with the economists Mariana Mazzucato and Richard Thaler shouting urgent utopian suggestions from the back seat, has since 1848 led to consequences we don’t need. It yielded in Europe and its imitators the excesses of nationalism, socialism, and, God help us, national socialism.

DBx: Yes.

The quotation that Hayek used to launch chapter 2 of The Road to Serfdom [2] is by Friedrich Hölderlin, who wrote “what has always made the state a hell on earth has been precisely that man has tried to make it his heaven.”

So very true. Venal rent-seeking motives, of course, are always in play. This fact is unfortunate. Yet as much as I despise rent-seeking special-interest groups – and despise even more the idiotic lies told to make these groups’ actions appear to be magnanimous – what is much more to be feared is zealotry for utopia.

And it matters not what the particular utopia might be. The notion of using the state to “internalize” all “externalities” – to “correct” all “market failures” – is a species of utopianism no less dangerous than other nightmares-nestled-in-dreams such as socialism.

Many readers will laugh. But I see what Deirdre and Alberto also seem to see: terror at the end of the trail blazed by those who are zealous to use the state to “correct” all “market failures.” As anyone knows who has studied the matter seriously, even identifying ‘genuine’ market failures and distinguishing these from situations that merely appear to be market failures is a practically impossible task.

This fact is so for many reasons, perhaps the most important of which is that there’s widespread disagreement even about what kinds of ‘outcomes’ markets “should” achieve. One important example: People on the left often list inequality of income as a market failure; many on the right – and all libertarians – disagree.

But there’s also this problem: the more seriously one takes the proposition that among the state’s proper roles is the correction of market failures, the more one comes to think of the economy as being more like a giant household with goals, and less like an emergent order without goals. Or perhaps the causality runs in the opposite direction: the more prone one is to think of the economy as a being akin to a giant household, the more one is prone to think of the state as the powerful head-of-the-household that has both the requisite knowledge and proper incentives to engineer the household’s affairs into better operating order. And, of course, to disobey daddy and mommy is childish, selfish, and sinful. Such disobedience cannot be tolerated.

This engineering perspective is pregnant with horrendous hazards – hazards made even worse by the lovely intentions that often are their parent.