Quotation of the Day…

by Don Boudreaux on June 25, 2020

in Competition, Complexity & Emergence, Hubris and humility, Myths and Fallacies

… is from page 38 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:

Consumers are not passive objects of an entrepreneur’s manipulative schemes, no more than an architect’s clients are passive objects of her vision. The feedback from consumers, of course, shapes the product no less than does the producer’s design. Consider twenty-thousand new food products, most of which fail. (The statist will consider this a fault of innovism: what a waste! For some reason she does not think similar venturing in, say, books or music requires a State to narrow the options.)

DBx: The reality identified here by McCloskey and Mingardi is among the many that advocates of industrial policy either miss or regard as a bug of free markets rather than as a feature. Either way, industrial policy is not really meant to steer the market, for industrial policy intentionally rids the economy of some substantial amount of feedback from consumers – that is, industrial policy rids the economy of a central feature of the market.

A sensible implication to draw from the above quotation from McCloskey and Mingardi is this: If you want a vivid image of what the actual results of industrial policy will be relative to the actual results of markets, compare the actual architecture of Soviet-suppressed eastern Europe to that of liberal countries.

In contrast, if you want an image of what are the hoped-for results of industrial policy from its advocates, simply clean up in your mind the actual buildings in Soviet-suppressed eastern Europe. Put two or three sparkles on those spotless yet still-colorless structures! Further imagine that happy and contented people, all forever smiling, frolic in the common areas while within these fine and uniform housing blocs the residents securely dine, party, relax, sleep, and make love. Grateful for the guidance and wisdom of their national leaders, all residents hope and expect that their lives and surroundings will continue, as they are, indefinitely, generation after generation. Meanwhile, in market-oriented countries – if we continue with our portrait of the imaginings of industrial-policy advocates – nearly everyone lives in ramshackle and dilapidated mud or wooden huts, miserable with shrinking wages and as they gaze upon the gleaming towers that house rapacious billionaires whose riches were ripped from workers and consumers.

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