… is from page 275 of the late, great UCLA economists Armen A. Alchian’s and William R. Allen’s Universal Economics (2018; Jerry L. Jordan, ed.); this volume is an updated version of Alchian’s and Allen’s magnificent and pioneering earlier textbook, University Economics:
Fortune does not hand down information and guidance to discover improved techniques of production and distribution of better products. It’s obtained by investing in risky exploration and experimentation with one’s own wealth. Some experiments, perhaps most, fail. The failures disappear with little publicity.
DBx: This point is either ignored, or severely discounted by, advocates of industrial policy. These advocates simply assume that they or the government officials charged with carrying out industrial policy possess, or can easily come to possess, knowledge of how to better use scarce resources.
It’s child’s play for an intellectual or a politician to identify real ‘imperfections’ in reality; it’s even easier to accuse reality of ‘failing’ when, in fact, reality reflects nothing more than the consequences of unavoidable trade-offs. But it’s impossible – yes, impossible – for anyone, regardless of how intelligent and well-read, to know and act on as many details of reality that are, at every moment, acted on in free markets.
Believing in the promises of advocates of industrial policy is as foolish as is believing in the promises of con men who peddle pills said to enlarge penises or burn off fat while you sleep.
