… is from pages 581-582 of Frank Knight’s August 1923 Quarterly Journal of Economics paper, “The Ethics of Competition” (emphasis added):
It is an idea sponsored especially by Dr. Thorstein Veblen and copied by others, that there is some distinction between “pecuniary ” and “industrial” employments and that society ought to take the control of industry out of the hands of ” financiers” and put it into the hands of “technicians.”
This notion rests on the same obvious fallacy, the idea that society has a choice between producing more goods and producing more value, and that it is the part of wisdom to prefer the former. It is difficult to take either part of the proposition seriously. The quantity of goods, if there is more than one kind, must so obviously be measured in value units. The proposal of leaving it to technicians in the respective fields to say how much social productive power shall be expended in each is merely grotesque; military experts would use it all for the army and navy, the medical men could usefully employ it all, and more, for health, and so on. There is no more important function of a first course in economics than to make the student see that the whole problem of social management is a value problem; that mechanical or technical efficiency is a meaningless combination of words.
DBx: Yes. Yet most popular and political commentary today – even in (indeed, especially in) ‘elite’ outlets such as the New York Times – reveals that this function of unsurpassed importance in the instruction of economics has not been carried out successfully.
Part of the problem is that many pundits and politicians simply never take a single course in economics. But the larger part of the problem is that far too many economics courses, even introductory ones, are taught incompetently. Lip service is paid to the fact that individuals’ preferences (including preferences for risk) are subjective. But then almost immediately these preferences are treated as objective facts that government officials can observe, compare, and aggregate in ways that allow these officials – whenever they (or their selfless advisors) conclude that the market is falling down on the job – to impose policies that ‘maximize efficiency.’