≡ Menu

Quotation of the Day…

… is from page 123 of the original edition of the late Wesleyan University economic historian Stanley Lebergott’s important 1964 volume, Manpower in Economic Growth:

Try one innovation a decade and you stand little chance of success. Try a thousand, and some of them will certainly pay off. (The same logic is in some measure pursued by the twentieth-century corporation with directed research teams, who look down a multitude of dead-end streets but win on the percentages.) A host of novel procedures or products, having proved their worth in this ceaseless ferment of experimentation, were then adopted.

DBx: One understands why Deirdre McCloskey insists on renaming capitalism “innovism.” The not-so-secret (but nevertheless easily overlooked) sauce of capitalist success at raising everyone’s living standards so remarkably is indeed market-tested (“proved their worth”) permissionless innovation.

Advocates of industrial policy would severely reduce the range of permissionless innovation in order to ensure that resources be allocated according to the plans of these advocates. In the minds of industrial-policy advocates, the test of a new pattern of resource allocation is in the minds of industrial-policy advocates. If these advocates like what their imaginations reveal to them, the imagined resource-allocation pattern is deemed good; if not, not. The preferences of hundreds of millions of other people spending and investing their own time and money are dismissed as irrelevant or unworthy.

All that is relevant and worthy in the minds of industrial-policy advocates are the imaginations and preferences of the industrial-policy advocates. That they can imagine and describe particular patterns of resource allocations or particular market ‘outcomes’ different from – and, in their minds, superior to – those allocations and outcomes that arise creatively in competitive market processes is sufficient justification, as these advocates see matters, to use coercion to impose their vision on all fellow citizens.

The hubris and arrogance are breathtaking.

Next post:

Previous post: