As Figure 1 shows, the industrial policy spending is as much as four times as costly as a pro‐growth tax reform package, and even the more conservative industrial policy estimate exceeds the more aggressive expensing estimate by more than $300 billion. Of course, this isn’t really a fair comparison because, at best, the subsidies will just reallocate existing resources, whereas pro‐growth tax cuts would expand the pool of total private investment and, just as importantly, put private investors—not politicians—in charge of determining where new investments should go.
Vance Ginn is very critical of the arguments in Oren Cass’s new book. A slice (spelling of Hayek’s first name corrected):
But the crux of Cass’s theory is that he believes markets must be molded, even referring to work by the father of modern economics Adam Smith. Conveniently, he fails to cite the economist Friedrich Hayek, who built on Smith’s ideas, to identify spontaneous order, the basis of free-market capitalism that argues economic growth and prosperity arise from voluntary transactions by free people, not government guidance and control.
This “new right” idea was debunked long before Cass came along by Hayek (and others), who also highlighted the “knowledge problem” associated with central planning. He argued that no central authority can possess the information necessary to make efficient decisions for an entire economy. The complexity of economic interactions and the constant flux of information require decentralized decision-making and market mechanisms to aggregate and incorporate local knowledge effectively.
Hayek’s insights emphasize the limitations of top-down control and the importance of allowing market forces and individual actors to shape economic outcomes based on their localized knowledge and preferences from the bottom-up. But Cass would have it that government is heralded as the keeper of knowledge and the arbiter of good decisions rather than encouraging freedom and liberty in individuals, i.e., the essence of capitalism.
Bureaucrats excel at pushing their policy agendas through gaps in the law, and the Commerce Department is showing how it’s done. The agency is expanding a subsidy to dictate social policy, pushing progressive causes on companies in many more industries.
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Yet now Commerce is expanding the program along with the strings. Grants originally meant for chip makers will also be made available for suppliers, Ms. [Gina] Raimondo says. That includes producers of chemicals, silicon, custom tools and more—a much larger cross section of the economy. The aid will be hard to decline for companies eager to keep a competitive edge, but they’ll have to join their chip maker customers in submitting to administrative social diktats to get the cash.
Richard Reinsch isn’t impressed with Patrick Deneen’s new book.
Jeffrey Miron makes the case against ‘forgiving’ student-loan debt.
Mike Munger explains that the trolley problem was discovered and solved by Adam Smith.
Christian Britschgi notes that “rent control 2.0 looks a lot like rent control 1.0.”
Dominic Pino wrote about Mel Brooks, who turned 97 yesterday.
