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Bonus Quotation of the Day…

… is from page 43 of the May 9th, 2020, draft of the important forthcoming monograph from Deirdre McCloskey and Alberto Mingardi, The Illiberal and Anti-Entrepreneurial State of Mariana Mazzucato:

For the alleged detection of “high growth if high risk areas” to be good for ordinary people, the interests of producers by themselves must not be the criterion of evaluation. Imagine biological evolution in which fitness was determined solely by the wishes of the existing species, or for that matter of the new species. The test is survival, or profit, interacting with the world as it is, not as one or another interested party passionately wishes it was instead. And the internal improvements and infrastructural investments have in fact been regularly corrupted into favors for the few and rich already in place, such as the investors in US transcontinental railroads, heavily subsidized by federal land grants and cheap loans backed by the Federal government. The transcontinentals were for a long time after they were built dubiously wise socially speaking, and privately profitable only by corruptly arranged subsidy. Admittedly, they were glorious.

DBx: Far worse than the economic ignorance of all sincere proponents of industrial policy is these people’s breathtaking arrogance. They think that they know – that they have somehow divined – in what specific ‘direction’ the economy should move. (Note that Oren Cass named his industrial-policy-pushing organization “American Compass.”)

Proponents of industrial policy claim to know which particular industries are better – better, that is, than the industries that emerge through market competition – for the millions of people of the country. They claim to know which are or will be the best jobs. Industrial-policy proponents claim to be able to predict the future! Or, even more astonishingly, they claim to possess the power to craft the future into the detailed forms that float as imagined Beautiful Systems in their heads.

Each supposes that he or she establishes his or her credibility by issuing trite observations of how real-world markets are “imperfect” – observations invariably mixed with tell-tale evidence that their knowledge of economics runs no deeper than superficial familiarity with some of that discipline’s jargon.

And each proponent of industrial policy gets mighty huffy if someone points out that there is every reason to believe that the incentives of government officials are not ones that are likely to lead them consistently to wield their power in the ways that industrial-policy proponents assert these officials will wield their power.

The notable defensiveness, haughtiness, and huffiness of industrial-policy proponents springs, I’m sure, from the fact that, deep down, each knows that he or she has no good answer to either of these two looming, fundamental questions: (1) How will government officials get the information that they must have in order to out-perform markets? and (2) What will prevent government officials charged with carrying out industrial policy from succumbing to interest-group pressures that subvert the pursuit of the general good?