The optimal equilibrium achieved by following the advice to centralize control, however, is based on assumptions concerning the accuracy of information, monitoring capabilities, sanctioning reliability, and zero costs of administration.
DBx: Yes. And it is discouraging to realize just how commonplace these unrealistic assumptions about reality are.
The standard sequence is as follows:
– Oh dear, the world isn‘t as close to perfection (or to my personal notion of worldly perfection) as I can imagine it to be. That‘s a problem that simply must be ‘solved.’
– To solve this problem requires empowering officials of the state to use threats of coercion as they rearrange people and resources in ways that will bring the real world into better alignment with my imagined closer-to-perfect world.
– State officials so empowered (assuming, of course, that my preferred political party – the angels – is in office rather than some other political party – the devils) can be depended upon to rearrange people and resources in ways that will achieve my desired goals. We needn‘t trouble ourselves with questions about the incentives facing the government officials or about how these officials will learn what they must know in order to rearrange people and resources in ways that successfully achieve my goal for society.
– To those of you who oppose my enlightened plan to bring reality into closer alignment with perfection, I note that you are so ideologically blinkered as to prevent you from seeing the great merits of my proposal, or – more likely – your motives are less admirable than are my motives (perhaps because you‘re bankrolled by a greedy billionaire). And to that subset of you who incessantly chant ‘Hayek! Hayek!’ – or, here, ‘Ostrom!’ ‘Ostrom’ – followed by questions about how government officials will acquire the knowledge they‘ll need to perform as I know they will perform, you people mistake your abstract theories for reality. In reality, of course government officials can get the required knowledge because these officials operate in reality and not in your imaginary Hayekian world.
Such proponents of industrial policy don‘t really understand Hayek‘s point. From their ignorance springs their hubris.