Quotation of the Day…

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… is from page 49 of my GMU Econ and Mercatus Center colleague Peter Boettke’s October 2011 Journal of Economic Behavior & Organization paper, “Teaching economics, appreciating spontaneous order, and economics as a public science,” as it is reprinted as chapter 4 of Pete’s 2012 collection, Living Economics (original emphasis):

The constellation of relative prices that actors within the economy face in making decisions provide them with both an incentive and a signal that is essential in their assessment of the situation as they choose this path or that. The existing array of prices, in other terms, provide the ex ante information about relative scarcities that economic actors use to infer alternative use of resources and methods of production. The market price that is paid for the good or service, and the profit and loss statement revealed in the market from offering those goods and services, provide economic actors with an ex post assessment of the appropriateness or inappropriateness of the enterprising decisions made. And, the very discrepancy between the ex ante expectations, and the ex post realization in the market, motivates the discovery or learning by economic actors of better ways to match their production plans with consumption demands. If this process of production and exchange does not take place, the knowledge and incentives required to produce the complex coordination of the market would not exist. It is not just that the information would be difficult to surmise; it is literally that it would not exist.

DBx: I’m aware that I repeat myself, but proponents of industrial policy ignore the reality described here by Pete. This ignorance, while apparently necessary in order for industrial policyists to successfully peddle their schemes, is fatal to their efforts to reallocate resources in ways that will improve the well-being of the people of the country.