… is from page 119 of Gerald P. O’Driscoll’s superb 1977 paper “Spontaneous Order and the Coordination of Economic Activities,” as this paper is reprinted in New Directions in Austrian Economics (Louis M. Spadaro, ed., 1978):
The institutional setting and the allocation mechanism matter in economics precisely because behavior in a changing world is not automatically coordinated. Laws and institutions have a significant impact on human behavior precisely because some facilitate and some inhibit the flow of information that is necessary for adaptation in a changing world. This realization is certainly contained in The Wealth of Nations – Smith’s emphasis on the importance of these matters suffuses that work.
And so persons who advocate industrial policy are among those people who, in effect, advocate obstructing the flow in information that individuals must receive and act upon if they are to adapt as well as is humanly possible to the changing preferences of their fellow human beings as well as to changing technologies and events in nature. Industrial-policy advocates – yet to explain how government officials will acquire the information necessary to out-perform the market at allocating resources in ways that promote the long-run welfare of the masses – apparently believe in miracles.