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Quotation of the Day…

… is from pages 134-135 of an advance copy of Samuel Gregg’s excellent and important 2022 book, The Next American Economy: Nation, State, and Markets in an Uncertain World (typo corrected):

Pursuing shareholder value and maximizing profits is how publicly traded businesses create economic value by facilitating choice in goods and services for consumers, providing wages and benefits to their employees, repaying their loans to banks, and paying just taxes. This helps increase the total material wealth in society, something that permits people who have never owned a share in their lives to realize goods ranging from health care to education. Capacious ideas of who and what is a stakeholder – especially when accompanied by social pressures from activist groups and back up by regulations that make ESG [environmental, social, and governance] compliance a requirement of law – compromise the ability of businesses to make its unique contribution to the wider common good.

DBx: Yes.

Contrary to what many people believe, the market process is quite the opposite of (to use inappropriate imagery suggested by Oren Cass) the meandering of a “drunk donkey.” There is an internal logic to the market process that guides individuals to seek out, discover, and seize opportunities to create value for strangers – strangers as consumers and strangers as workers and other input suppliers. This process is guided by market prices and the desire to earn profit and to avoid losses. The result over time is economic growth and ever-greater prosperity for the masses.

This prosperity, it’s vital to note, comes not merely – indeed, not chiefly – in the form of material goods and services that gratify sensual pleasures or the urges of the moment. This prosperity comes largely in the form of longer lives and healthier lives (and, hence, reduced chances of parents burying their own children), more education, more leisure, greater access to art, more travel, and more and better science. That this process doesn’t work perfectly (whatever such a standard might be in practice) is, of course, indisputably true. But that this process works remarkably well is attested to by the astonishingly high standard of living of ordinary people in today’s market-oriented economies.

In contrast, those persons who propose to override the market process with “ESG investing” requirements or with industrial policy offer no substantive, competing explanation of how decision-makers under their schemes will accurately identify opportunities to improve the allocation of resources and then be able to move quickly enough to achieve these improvements. Proponents of “ESG investing” and of industrial policy – no less than do proponents of full-on socialism – simply assume that all the vast and detailed knowledge necessary for their schemes to succeed as advertise will somehow be gotten by the managers or mandarins given power to ignore market signals as they make resource-allocation decisions. Such proponents of overriding market processes believe in miracles.

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