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Quotation of the Day…

… is from page 163 of F.A. Hayek’s profound 1952 book The Counter-Revolution of Science, as this book appears as part of volume 13 (Studies on the Abuse & Decline of Reason, Bruce Caldwell, ed. [2010]) of the Collected Works of F.A. Hayek:

The fact that no single mind can know more than a fraction of what is known to all individual minds sets limits to the extent to which conscious direction can improve upon the results of unconscious social processes.

DBx: Yes. Yet this reality is ignored by every advocate of using industrial policy as a means of raising overall living standards in the national economy. Such advocates of industrial policy simply do not understand just how complex is the economic order into which they demand the government intervene. Such advocates of industrial policy – nearly all of whom I believe to be well-meaning – simply have no idea just how important for even minimal economic efficiency is the on-going necessity of using highly localized, detailed, often fleeting knowledge that is available only to individuals on the spot. This knowledge is of a sort that cannot possibly be acquired by government officials charged with carrying out industrial policy; it is of a sort that is necessarily invisible to even the finest econometricians and statisticians; and it is of a sort that is intended to be squelched by the tariffs, subsidies, and other interventions imposed under the name of “industrial policy.”

As I believe Michael Polanyi put it somewhere (I think in The Logic of Liberty), the likelihood of central planners gathering such knowledge, processing it rationally, and applying it effectively is no higher than is the likelihood of a cat swimming across the Atlantic ocean. That the human mind can imagine a cat performing such a fantastic aquatic feat is indisputable. But equally indisputable is the fact that no cat will ever come close in reality to beginning to be able to perform such a feat.

Advocates of industrial policy mistake their ability to describe in words – and perhaps in mathematical formulae – what they think to be the economic equivalent of what a cat must do to swim from Cape Cod to Dunmore Head in Ireland as proof that industrial policy can be successfully implemented to improve the economic performance of the domestic economy. Ignored – mysteriously, to my mind – is the inevitable reality that any cat actually pressed to perform such a feat would, soon after leaving the U.S. shore, meet a terrible end because no cat is constituted to succeed in such an effort.

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