… is a reprise from more than nine years ago; specifically, it‘s from page 81 of the late economics Nobel-laureate Douglass North‘s 1990 volume, Institutions, Institutional Change and Economic Performance (links added):
We need to read, again, Armen Alchian (1950) to understand this. In a world of uncertainty, no one knows the correct answer to the problems we confront and no one therefore can, in effect, maximize profits. The society that permits the maximum generation of trials will be the most likely to solve problems through time (a familiar argument of Hayek, 1960). Adaptive efficiency, therefore, provides the incentives to encourage the development of decentralized decision-making processes that will allow societies to maximize the efforts required to explore alternative ways of solving problems.
DBx: Proponents of industrial policy ignore this reality. Each proponent of industrial policy arrogantly supposes that his or her particular vision of what the economy should look like, today and into the future, is ‘correct.’ Each proponent of industrial policy is astonishingly naive about the nature of economic processes and the complexity of modern economies.
Pictured above is Doug North receiving his Nobel Prize in 1993.