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Bonus Quotation of the Day…

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… is from page 1 of Vol. II (“The Mirage of Social Justice” [2] [1976]) of F.A. Hayek [3]’s great work, Law, Legislation, and Liberty:

In a free society the general good consists principally in the facilitation of the pursuit of unknown individual purposes.

DBx: This insight is profound – as can be understood by reflecting on how very many benefits you enjoy, in every minute of your life, that are the results of strangers each pursuing their own individual, specific purposes that are unknown to you and that were unknown (and were unknowable) to government officials at the time these pursuits were undertaken.

You and I benefit whenever someone profits from implementing a new and better way to produce existing products, or profits from producing new products. Such profit arises from doing that which is novel – from doing that which no one, in the past, had the foresight to do. Economic (as opposed to accounting) profits earned in markets reveal quite well the monetary value of seizing opportunities that, until the profits were earned, had yet to be seized – opportunities that, indeed, in most cases had yet even to be noticed.

You and I benefit from Henry Ford’s innovative idea to manufacture automobiles using an assembly line. We benefit from Malcolm MacLean’s creative idea for container shipping. We benefit from Steve Jobs’s insistence on driving innovation and high-quality at Apple. We benefit from Fred Smith’s innovative idea for overnight package delivery. We benefit from Ron Zappe entering the potato-chip market [4]. We benefit from Jeff Bezos’s innovations in retailing, just as we benefitted from Sam Walton’s – and, long before him, from Richard Warren Sears’s – earlier innovations in retailing.

Each of these individuals – like each of literally millions of other entrepreneurs over the past few hundred years – pursued his and her own goals in ways that would have been inconsistent with any plan for the economy.

Unless proponents of industrial policy discover a way to impart near-omniscience to the government officials charged with the task of consciously directing the economy in ways that improve the masses’ living standards over time, all industrial-policy schemes are doomed to fail. By “fail,” I mean that such schemes are doomed to result in economic outcomes over time that are worse than would be the economic outcomes that emerge spontaneously from competitive market process in which profits and losses play key roles, and in which income earners are free to spend, and invest, their incomes as they choose.

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