… is from page 268 of Matt Ridley’s excellent 2020 book, How Innovation Works: And Why It Flourishes in Freedom :
Much ‘growth’ is actually shrinkage. Largely unnoticed, there is a burgeoning trend today that the main engine of economic growth is not from using more resources, but from using innovation to do more with less: more food from less land and less water; more miles for less fuel; more communication for less electricity; more buildings for less steel; more transistors for less silicon; more correspondence for less paper; more socks for less money; more parties for less real time worked.
DBx: Indeed! But what there are more of are ideas – creative, productive, fruitful ideas. These ideas are tested against each other in competitive markets, for the worth of entrepreneurial, investment, marketing, and management ideas can be determined only in competition with other ideas offered by anyone who wishes to spend his or her own money and effort to offer up ideas.
Correct ideas for what goods and services are best to produce and of how best to produce them cannot possibly be discovered in the heads and from the keyboard strokes of politicians, bureaucrats, media pundits, professors, or think-tank scholars. These individuals, of course, can each have ideas about what should be produced and about how best to produce those things. And these individuals ought to be free, along with everyone else, to test their ideas in the market as most other people test their own ideas in the market – specifically, without special privileges granted by government.
Unfortunately, most politicians, bureaucrats, media pundits, professors, and think-tank scholars are so utterly uncreative that they cannot imagine how to arrange to turn their ideas into reality except by brute force. So they they plead for government to initiate coercion against other people in order to direct other people to behave according to the fancies of these politicians, bureaucrats, media pundits, professors, and think-tank scholars.
It’s as if a researcher at, say, American Compass were unhappy with the current state of American music and proceeds to insist that more music composed in America ought to be more like the music of the baroque. This researcher then writes papers demanding that government adopt a music policy to ensure that Americans compose and perform and listen to more baroque music.
The researcher, of course, doesn’t fail to detail all the many problems that he or she believes spring from the current state of American music. Nor does this researcher fail to boast of all the many wonders that ordinary Americans will reap once the state engineers American music to sound more like this researcher is convinced American music should sound.
“Why don’t you compose your own musical scores and offer to sell the sheet music or performances of your music to the paying public?” someone eventually asks the researcher.
As they say, crickets. No answer.
The researcher, let us be frank, is no composer. He or she doesn’t know the first thing about composing music – for if he or she did, and if he or she were truly convinced that Americans are craving more baroque-style music, he or she would be rolling in the dough by composing and selling such music.
The researcher specializes in telling people what they should do with their own money. Or, more precisely: the researcher specializes in telling audiences about, and advising government on, how government should coerce countless strangers to behave in ways that the researcher believes will bring the world into closer conformity with his or her fancies.
When the example is music (or art more generally), as Deirdre McCloskey often points out, the unworkability of such schemes is evident. No one of any sense supposes that a U.S.-government-orchestrated “music policy” would improve American music. The realization would immediately be widespread, upon encountering such a proposal, that a “music policy” would result in dreary, uncreative, uninspired tunes.
But substitute “industrial policy” for “music policy,” and suddenly scores of people are nodding their heads at the brilliance and promise of the notion. Among the reasons for this disconnect is a failure to understand that business entrepreneurs are just as creative as are composers, and that business ideas, like musical idea, prove their worth only by being tested in front of paying audiences.
Another reality that goes unrealized by enthusiasts for industrial policy is that, just as new and beautiful musical styles often emerge from surprise mixings of different existing styles, new and productive business ideas often emerge from surprise mixings of existing ideas. The emphasis here is on surprise. Even though the styles and ideas that prompt new ones pre-exist the new ones, the new ones are indeed new. As Matt Ridley explains in his 2010 book, The Rational Optimist , “ideas have sex”: That the genes that created you pre-existed you does not mean that you are not a unique creature.
Now that I’ve changed metaphors, I’ll go a bit further with the new one: It’s accurate to say that advocates of industrial policy are advocates of economic incest. No surprise, free mixing of ideas for them!. All ideas that germinate will have one source: the relatively tiny handful of officials who run the state.
The economic results of such a closed economic system are destined to be just as unfortunate as are the results of a closed mating system.