… is from page 70 of Rachel Mathers’s excellent Summer 2012 Independent Review paper, “The Failure of State-Led Economic Development on American Indian Reservations“:
For rational economic calculation to be possible, there must be a system of private-property rights that allows free price changes and the resulting profit-and-loss accounting. Without these prerequisites, rational economic calculation cannot occur because the necessary feedback will be distorted or absent, and individuals will be unable to figure out how to (re)allocate scarce resources among different uses in an economically efficient manner.
DBx: In the paper from which this quotation is drawn, Prof. Mathers examines the record of the U.S. Economic Development Administration (EDA) at promoting economic growth on American Indian reservations. As described on Wikipedia, the EDA – which is part of the U.S. Department of Commerce – “provides grants and technical assistance to economically distressed communities in order to generate new employment, help retain existing jobs and stimulate industrial and commercial growth through a variety of investment programs.” But as documented by Prof. Mathers, the EDA’s record is sorry.
I suspect that many people will dismiss the following questions as unfair or at least as irrelevant, but I’ll ask them anyway. Given that the U.S. government has had such poor success promoting economic development in America’s economically distressed Indian reservations, what reason is there to believe that if we scale up government efforts, in the form of economy-wide industrial policy, to promote American economic growth nationwide, the government will successfully promote American economic growth? Isn’t the EDA’s record powerful evidence against all the happy predictions offered by proponents of industrial policy?
