There’s No Substitute for Market Competition

by Don Boudreaux on October 9, 2020

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

My regular correspondent Nolan McKinney defends Brink Lindsey and Sam Hammond from my criticism of their proposal for “development policy.” Here’s my reply:

Mr. McKinney:

You accuse me of being “guilty of neglecting [Brink] Lindsey’s and [Sam] Hammond’s proposal to use competition for determining what industry ideas are good and which are bad.”

I plead innocent.

The competition to which you refer that Lindsey and Hammond endorse is competition for government funding. Whatever its merits, the requirement that persons seeking taxpayer funds compete against each other to impress government officials with business, research, or “development” ideas is not the kind of competition that actually discovers which industry ideas are sound and which are unsound. Unlike private entrepreneurs and investors, government officials spend other-people’s money. Even worse, these officials – by the logic of industrial policy – must coercively obstruct entrepreneurial investments and consumer expenditures that are inconsistent with government’s industrial-policy plans.

The only kind of competition that truly discovers good ideas is market competition – the kind that exists when entrepreneurs and investors need no permission from the state to offer goods and services to consumers, and when consumers are free to spend their incomes as they see fit. Industrial policy by its very nature displaces this competitive process with static blueprints schemed up by arrogant politicians, bureaucrats, and intellectuals.

Industrial policy substitutes the irreducible ignorance of a handful of puny individual minds for the vast knowledge that can be discovered, meaningfully tested, and refined only when as many minds as are willing are free to interact with each other as each deems best.

In short, to choose industrial policy over free markets is to choose ignorance over information, stupidity over knowledge, folly over wisdom, irresponsibility over responsibility. Changing its name to “development policy” changes nothing of this reality.

Sincerely,
Don

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