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Quotation of the Day…

… is from page 276 of F.A. Hayek’s 1966 paper “The Principles of a Liberal Social Order” as this paper is reprinted as chapter 21 in Essays on Liberalism and the Economy (2022), which is volume 18 (expertly edited by Paul Lewis), of The Collected Works of F.A. Hayek:

The first peculiarity of a spontaneous order is that by using its ordering forces (the regularity of the conduct of its members) we can achieve an order of a much more complex set of facts than we could ever by deliberate arrangement, but that, while availing ourselves of this possibility of inducing an order of much greater extent than we otherwise could, we at the same time limit our power over the details of that order. We shall say that using the former principle we shall have power only over the abstract character but not over the concrete detail of that order.

DBx: Proponents of industrial policy and similar ‘piecemeal’ interventions will often protest, if they are aware of Hayek, that Hayek’s demonstration that ‘rational’ resource allocation under full-on socialism isn’t applicable to their proposed interventions. But this protest is mistaken. The logic of Hayek’s argument reveals that, while a ‘piecemeal’ intervention won’t itself cause as much damage as would full-on socialism, a ‘piecemeal’ intervention such as industrial policy nevertheless is fundamentally inconsistent with the market’s spontaneous-ordering forces.

For the market to function as well as is possible, we cannot pick and choose which particular prices and resource-allocation patterns we like and which we don’t. We cannot forcibly attempt to change the prices and patterns that we don’t like into ones that better suit our fancy, while expecting the prices and resource-allocation patterns that are not the direct objects of our intervention to remain unchanged. The enormous interconnectedness of markets simply will not allow such an outcome.

Not only is any such intervention an attempt to unfairly exempt some workers and resource owners from having to abide by the rules of the market, the unintended and unseen consequences – both economic and political – are very likely to be worse than whatever benefits might be expected from the ‘success’ of the intervention.