≡ Menu

Quotation of the Day…

… is from page 211 of economist Lionel Robbins’s superb and still-relevant 1937 book, Economic Planning and International Order:

For it is the essence of capitalist competition in a changing world that there should be a continual reinvestment of capital in new forms and combinations.

DBx: Yes. And therefore attempts by the state either to prevent this reinvestment or to direct it as politicians and bureaucrats – rather than as investors and entrepreneurs – desire are at odds with the essence of the capitalist market order.

There’s no doubt that the state can prevent reinvestment here and redirect reinvestment there. But there’s also no doubt that the state officials who today intervene in this manner do not know what will be the full range of the consequences of their interventions. Further, we can be sure that many of these unintended consequences will be undesirable. The reason for the former is inescapable human ignorance combined with the unfathomable complexity of modern economies. The reason for the latter – that is, the reason why many of the unforeseen consequences will be undesirable – is that these interventions pull resources away from where entrepreneurs and investors, spending their own money and guided by market prices, believe these resources will produce the most possible consumer satisfaction (as revealed in prices influenced by consumers spending their own money), and redirect these resources into uses that are little more than the abstract fancies of politicians or intellectuals – or into uses that serve the very concrete narrow interests of rent-seeking producer groups.


Pictured above is one of America’s great entrepreneurial success stories – a story at the center of which is a process that, having earlier enabled this company to succeed, eventually enabled other entrepreneurs later to redirect capital away from it into newer forms of production and distribution. Both stages saw improvement in consumer welfare. (See also the Quotation of the Day from exactly on year ago.)