… is from page 17 of the late Ronald Max Hartwell’s 1983 paper “The Origins of Capitalism: A Methodological Essay,” which is chapter 2 of the excellent 1983 collection, edited by the late Steve Pejovich, Philosophical and Economic Foundations of Capitalism:
It was the gradual freeing of man’s entrepreneurial talents from the bonds of custom and command that finally resulted in the remarkable economic growth of the industrial revolution.
Proponents of industrial policy wish to imprison human beings’ entrepreneurial talents behind the iron bars of government-imposed economic ‘plans.’ While Oren Cass and other advocates of industrial policy insist that they are promoting a good higher than ‘mere’ economic growth (as if longer, healthier, and culturally richer lives are ‘mere’), they nevertheless don’t admit – or, worse, they do not see – that their schemes are inconsistent with genuine innovation.
If genuine innovation is allowed, it necessarily turns plans that today appear excellent into plans that tomorrow must be ditched and replaced even if the goals of the original plan are to continue to be pursued. Plans are designs that muster particular means in particular ways in the hope of achieving particular ends. Because innovation will disrupt the means available for carrying out the plan (not to mention also likely presenting new ends that warrant consideration), industrial policy – if it is to be seriously pursued – must stamp out innovation.
But if industrial-policy proponents, understandably embarrassed of being correctly accused of wishing to stamp out innovation, proclaim their openness to innovation, it’s then necessary to probe just how they intend to accommodate innovation. The only possible answer is that they will allow the introduction only of those innovations that they (think they) can figure out how to fit into their industrial-policy plans. Yet not only will this approach dampen the incentive to innovate – so innovations will be fewer – the industrial-policy shamans will also have to try to predict future innovations if their plans aren’t to quickly fall apart. Such prediction, however, is impossible. (If you deny that such prediction is impossible – that is, if you believe that such prediction is possible – then prove your case by predicting even some of the innovations that will occur, say, within the next 12 months. If you can do so, you can then easily use your god-like knowledge to become by far the world’s richest person in one-year’s time. If you’re not the richest person on April 23, 2024, then please reassess your understanding of innovation – or your understanding of the human mind.) The practical result of any such scheme would be that ‘the plan’ soon is abandoned in favor of the practice of government officials deciding, almost on a daily basis, not only which innovations to allow and which to suppress, but also how to change – again, almost on a daily basis – the allocation of resources so that the hoped-for results materialize.
In short, industrial policy is as compatible with innovation as a seder dinner is with a spiral ham.