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… is from page 24 of Matt Ridley’s wonderful new (2020) book, How Innovation Works: And Why It Flourishes in Freedom [2]:
Innovation seems so obvious in retrospect but is impossible to predict at the time.
DBx: As Deirdre McCloskey persuasively argues [3], economic growth of the sort that we denizens of modern, prosperous countries enjoy requires an orgy of innovation. McCloskey calls it “innovism.” For economic growth of this sort humankind needs more than mere ‘efficient allocation of resources’ in the static sense that continues to be a top feature of mainstream economics. Humankind needs more than mere capital accumulation, although tools and their financing are indeed necessary inputs into modern economic growth.
Humankind needs innovation, and plenty of it.
But the details of innovation, being unpredictable, cannot possibly be planned or planned for. Every time I encounter the phrase “the industries of the future” or “the technologies of tomorrow,” I roll my eyes. No one knows what industries and technologies will be important tomorrow. If someone did know such a thing, that person could very quickly become the world’s first multi-trillionaire. And such an unprecedented seer would deny both himself and his fellow human beings enormous material prosperity by working as a politician, think-tank scholar, or Professor of This and That at Prestigious Univ.
Yet we have no shortage of people posing as such seers.
Oh, these costume-party seers are sufficiently clever to deny that they know what the future economy will look like in detail. Perish the straw-man thought! What these seers instead boast is that they’ll use the power of government to clear the way for the advance of technologies, and for the thriving of industries, that are better than those which would otherwise arise in free markets.
These seers are perhaps really so unreflective about their own pronouncements as to miss the fact that success of their schemes requires that government officials be invested with the miraculous power to predict not only which sorts of technologies and industries would arise on competitive free markets, but also which sorts of different technologies and industries would be an improvement over those that would emerge in markets. Assurances, in effect, that the Ministry of Industrial Policy would never be so bold as to predict the optimal colors of the Gadgets of tomorrow – “Choices such as those we’ll leave to the market!” – in no way excuse the seers from the obligation of informing us of how the Ministry will know which sorts of as-yet-to-arise technologies and industries must be avoided, and which as-yet-to-arise technologies and industries can and should be ‘arranged for.’
In short, advocates of industrial policy might be more sincere than are peddlers of get-rich-quick-by-flipping-houses brochures, but they are peddling schemes no less ridiculous.