≡ Menu

Bonus Quotation of the Day…

… is from pages 87-88 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 (emphasis original to McCloskey and Mingardi; link added):

Private companies, according to a lovely diagram, are said to never, ever to provide for public goods (this despite massive empirical evidence à la the first female Nobelist in economics, Elinor Ostrom, that companies and other supposedly selfish institutions dominated by the Prisoner’s Dilemma do so, routinely). In getting public goods and solving externalities, the crucial disability of the State is precisely the “scale and . . . the tools not available to businesses (i.e. taxation, regulation)” – which is to say massive, politically guided coercion without a test actual or imagined of profit paid by consumers.

DBx: This point is vital. Mariana Mazzucato – who is quoted in the above by McCloskey and Mingardi – serves up a standard trope that every economics student learns in Econ 101. This trope continues to be repeated in nearly all economics courses through the end of graduate studies. And yet this trope, by its very own logic, devours itself: Precisely because government officials get to spend other people’s money and to unilaterally order other people around, government officials have very little incentive to promote allocations of resources that are as efficient as possible from the perspective of the public at large.

Yes, of course, no real-world free market will ever operate as efficiently as it would were it designed and superintended by god. But operation-by-god is not the appropriate standard, despite it being the standard that is typically used. The appropriate standard of comparison for real-world market outcomes is the set of outcomes likely to emerge when resource-allocation decisions are in the hands of real-world government officials.

What is never adequately explained is just how the giving of power to some individuals to initiate coercion over other individuals will reduce the number and severity of instances in which some individuals act without taking due consideration of the interests of other individuals.