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Quotation of the Day…

… is from pages 35-36 of the Mercatus Center’s 2016 re-issue of my late colleague Don Lavoie’s indispensable 1985 volume – one that all proponents of industrial policy should read before going public with their economically naive proposals – National Economic Planning: What Is Left?:

In traditional societies it is quite rational to be reluctant to diverge from old and established methods. One of the chief advantages of the Market as a coordinating process relative to Tradition is that it facilitates a far more diverse and rapid experimentation with new productive techniques.

With technological experimentation now so much less costly, productive methods can change much more rapidly as guided by the attraction (or repulsion) of potential profit (or loss). The production methods of society are freed from the relatively rigid constraints imposed by the risk-averse adherents of traditional methods and now become increasingly dictated by the new standard of profitability.

DBx: In markets, the allocation of resources is guided by prices confronted by, profits earned by, and losses suffered by individuals spending their own money. And because what is ‘destroyed’ by market-driven creative destruction isn’t anything physical or biological – because what is destroyed isn’t human lives – because this ‘destruction’ is merely of economic value and is the result only of peaceful and productive choices rather than of war or famine or disease – the process of creative destruction is a blessing for humanity. To the extent that it is allowed to operate, the process of creative destruction brings us ever-greater prosperity.

Advocates of industrial policy imagine that, by some miracle, government officials can allocate resources in ways that either do not cause losses to anyone, or that cause only particular losses that are less burdensome or more acceptable than are the particular losses caused by creative destruction. But this imagined miraculous ability of government officials is purely fanciful. Why should we suppose that whenever industrial-policy mandarins order that resources be shifted from Here to There, that the particular losses suffered by those persons who are Here will be both more than offset by the resulting gains to the persons who are There, and be less troublesome than are the losses suffered by those persons whose firms or jobs are ‘destroyed’ by market-driven creative destruction?

We’ve no reason to believe any such thing, not least because industrial-policy proponents seldom even acknowledge this question. A question unacknowledged is a question unanswered.

Industrial-policy proponents write and plead as if the costs, if any, of such a policy are guaranteed to be small enough to justify the benefit. The details of the imagined benefits from industrial policy differ across the different industrial-policy advocates. Many “natcon” advocates of industrial policy seem to believe that the promise of industrial policy lies in its ability to revert the American economy back to what these advocates imagine the American economy to have been in the past – a past near enough to be remembered as one of widespread prosperity yet distant enough to have the details of its reality gauzily veiled by nostalgia.

It’s impossible to return the American economy to the 1950s or 1960s or 1970s. And thank goodness, for if such a return were somehow engineered, even today’s most ardent champions of industrial policy would soon lament the results of their handiwork. We Americans in 2022 are not just a bit more materially prosperous than were Americans of the 1950s, 1960s, or 1970s. We are spectacularly more prosperous.

Don’t believe me? Do your best to spend just one month back in that halcyon time. Lock up for 30 days your laptop(s), your desktop, your iPad, your smartphone, and your Google Home. Don’t use even that old scientific pocket calculator that’s been stranded for more than a decade in the back of one of your desk drawers. You may, however, use a slide rule.

Of course, do no e-banking or Venmo-ing. Tell those who owe you money to hand or to mail to you a physical check, and you do the same to pay those persons who owe money to you. To deposit your check, go to the bank. Physically go to the bank. Even though ATMs came rather late, I’ll let you use one to withdraw cash, deposit checks, and to check your bank balance. However, you may not use a debit card.

As for a vehicle to drive, find a 1957 Chevy or a 1977 Buick LeSabre (or even a 1987 Oldsmobile Cutlass). Don’t take any medications that weren’t available to the general public before 1990 – and be sure to have your parents, grandparents, and children do the same. If you wear soft contact lenses, stop. Instead wear your glasses. (If you’ve had Lasik surgery or – like me – are surgically fitted with artificial lenses that restore your vision to 20/20, well, I’ll not ask you to undo that marvelous medical procedure. But please do recognize that no such marvels would have been available to you, your spouse, or your parents even just a few decades ago.)

Lay your hands on an old CRT “television set” (as we called such a thing back in the day), and content yourself to watch on that low-res beast only what is telecast by ABC, CBS, NBC, and PBS. Dust off your stereo along with your Frank Sinatra, Platters, Beatles, Engelbert Humperdinck, ABBA, and Journey vinyl records and listen only to those and their like. If you want to buy an airline ticket, find a wall or desk phone, preferably one with a rotary dial, and call the airline to make your reservation – and then contact me for help at finding the real price that your roundtrip fare from D.C. to L.A. or from Salt Lake City to Boston would have cost you in, say, 1975. Offer to pay to the airline that higher sum.

In the supermarket, pretend that 9 out of every 10 of the items there for sale are not there. And when you’re finished filling your cart with the items from your relatively meager options, you may not use the self-checkout lanes. Wait in line to be checked out by the cashier who just started to help the young father with a grocery-cart overflowing with a week’s worth of groceries for his family. (Once you get to the front of the checkout line, you can’t practically avoid enjoying the speed of having your groceries scanned rather than have the cashier punch into a cash register the price of each item. So I’ll let that pass.)

In your kitchen, avoid using the pull-down feature of your kitchen-faucet’s retractible nozzle. Avoid also using the built-in straps in the linings of each of your plastic kitchen garbage bags. Although each of the canned goods that you might wish to open can be opened easily by pulling on the built-in tab, instead use a can opener. (Feel free to encore the old electric one that was last operated during the first presidential term of Bill Clinton.)

Of course, accept and send no overnight deliveries.

Oh, and you yourself mow – or have your kids mow – your own lawn. It’s not realistic to hire that crew of hard-working Hispanics to mow it for you.

Those who today yearn for middle-class American prosperity of the 1950s, 1960s, 1970s, or 1980s either weren’t alive then or their memories are severely tarnished. These yearners for yesteryear yearn not for the full package of what actually back then existed, but either for what they mistakenly imagine to have existed, or for only one select aspect of what existed (for example, lower labor-force participation of women) as if that aspect can be regained without the entire package of which that one aspect was a part.

Advocates of industrial policy are dreamers. But not dreamers who dream realistically. Their dream, were it to come true, would trap us all in, if not quite a nightmare, a dream most unpleasant and disturbing.

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