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Quotation of the Day…

… is from page 190 of Deirdre McCloskey’s and Alberto Mingardi’s excellent 2020 book, The Myth of the Entrepreneurial State:

In planning the program of the economy – or the program of art or science or architecture or craft work or social customs – the one mind even of a genius does not usually do as good a job as does the artificial intelligence machine known as commercially tested betterment, millions of minds having a go in markets. Imagine a central planning of fine-art painting only as fresh attempts at Picasso’s program, or architecture only as fresh attempts at Mies van der Rohe’s program, forever, by State order, with if necessary a boot on the face.

DBx: Indeed.

Market competition – with each seller having the right to say ‘no’ to offers to buy, and each buyer having the right to say ‘no’ to offers to sell – is a procedure for discovering information about relative consumer values and about relative values of inputs. It is indeed this. But market competition is also a procedure of creation.

Consumers’ quest for getting the most out of their incomes, and producers’ quest for earning as much profit as possible, drives the latter to search for novel outputs to produce and for novel means to produce and distribute existing, ‘known’ goods and services. The quest of the former – of consumers – drives them to channel resources only to those outputs that they believe are worth the costs.

It is literally impossible for a government planning authority to know in advance – in advance, that is, of actual experimentation in actual markets powered by actual individuals spending their own money – not only what new ideas might arise, but also to know which of the new ideas that do arise are worthwhile and which aren’t.

Nothing is easier than writing words similar to the following: ‘With properly structured industrial policy, government will do a better job than does the market at directing resources to those industries that are best for the country.’ Sounds wonderful. Who doesn’t want resources directed in ways that are better for the country? Yet such a statement is an aspirational one that’s passed off as an operational one.

When pressed for details on how industrial-policy officials will obtain the knowledge necessary for them to direct resources on ways that are better for the country, no substantive answer is given. (Well, no substantive answer is given by any one who actually understands just what the question is asking.)