Mr. Robert Lighthizer
United States Trade Representative
Washington, DC
Mr. Lighthizer:
You call for the U.S. government to adopt industrial policy. And of course you insist that such a policy would result in splendid outcomes. Yet nowhere do you indicate how you and other government officials would get the information necessary to enable your schemes to outperform the competitive market processes that you propose to displace. This omission is fatal to the intellectual credibility of your case.
To see why, you could consult classic arguments by economists on the idiocy of industrial policy – arguments, for example, offered in this article by Charles Schultze and in this book by Don Lavoie. But, frankly, I doubt that you’ll bother reading these materials that you – given your position and your policy proposals – really should read. And so, because today is the 297th anniversary of the birth of Adam Smith, I simply leave you with a passage from The Wealth of Nations – a passage in which Smith eloquently warns against the pretenses of persons such as you:
What is the species of domestick industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.
To give the monopoly of the home-market to the produce of domestic industry, in any particular art or manufacture, is in some measure to direct private people in what manner they ought to employ their capitals, and must, in almost all cases, be either a useless or a hurtful regulation.*
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
* Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations (1776 [1981]), page 456.
