… is from page 172 of the 2015 Mercatus Center edition of the late Don Lavoie’s insightful 1985 book Rivalry and Central Planning  (references deleted; link added):
The crucial distinction that Hayek introduces  in this regard is between “scientific knowledge” and “unorganized knowledge,” or “the knowledge of the particular circumstances of time and place.” The latter, he insists, cannot be available except to the “man on the spot.” It is only by employing such particular knowledge in conjunction with the “telecommunication” system of prices that rational economic decisions can be made, and only a price system that is driven by the forces of competition can facilitate the dispersal of knowledge.
DBx: Industrial policy is the replacement of price-guided resource-allocation patterns with commands issued by politicians and their hirelings. But as Hayek points out, it is impossible for politicians and their hirelings to possess any of the “knowledge of the particular circumstances of time and place” that must be known if the resulting use of resources is to serve human purposes without also being stupendously wasteful.
To replace markets with industrial policy is to replace an information-generating process with ignorance. It is to toss aside access to information and to rely instead upon uninformed stupidity. Advocates of industrial policy are advocates of economic stupidity. Of course, advocates of industrial policy do not understand that they are advocates of economic stupidity; their ignorance of economics blinds them to the reality of their schemes. But the reality of their schemes is not optional.
I challenge any advocate of industrial policy – Oren Cass, Ian Fletcher, Marco Rubio, Elizabeth Warren, Daniel McCarthy, whoever – to explain substantively how such information will be acquired. Is it supposed that individuals will use their smartphones to text information, moment to moment, to mandarins and commissars? Will government officials, upon assuming office, gain supernatural powers? Will this information be gathered and carried into government office buildings by angels from the heavens or by magical elves from the forests? Or is the theory that this information will transmit itself into the brains of bureaucrats, over some mysterious pathway?
What is the mechanism or process of information acquisition? The question is not unreasonable.
Offering a ponderous list of the many ways that real-world markets fall short of textbook perfection will not suffice. Not only is any such list old news, it doesn’t begin to answer the question of how industrial-policy commissars and mandarins will acquire the amount of knowledge routinely compressed into market prices and transmitted widely.
I search in vain the writings of industrial-policy advocates for an explanation of the sort that I here (and, obsessively, in many other blog posts) request. Yet not only do I find no such explanation, I find not even a recognition that such an explanation is necessary. I find only an unsupported implicit assumption that the officials charged with carrying out industrial policy will, somehow, out-perform the competitive market process.
However inadequate and incomplete is the economic theory upon which the case for free markets rests, this theory is infinitely better than the non-theory – the utter absence of explanation – that is ‘offered’ by advocates of industrial policy.