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Quotation of the Day…

… is from pages 487-488 of the 1901 Third Edition of Henry Sidgwick’s 1883 book, The Principles of Political Economy:

I do not think we can reasonably expect our actual Governments to be wise and strong enough to keep their protective interference within due limits; owing to the great difficulty and delicacy of the task of constructing a system of import duties with the double aim of raising revenue equitably and protecting native industry usefully, and the pressure that is certain to be put upon the Government to extend its application of the principle of protection if it is once introduced. I think therefore that the gain that protection might bring in particular cases is always likely to be more than counterbalanced by the general bad effects of encouraging producers and traders to look to Government for aid in industrial crises and dangers, instead of relying on their own foresight, ingenuity and energy; especially since the wisest protection in any one country would tend in various ways to encourage unwise protection elsewhere.

DBx: It’s tempting to do economics as if an omniscient and omni-benevolent god were able and willing to hire itself out as the faithful agent to follow the mortal’s policy recommendations. Imagining oneself tapping into god-like knowledge and power is heady, and from that high perch the real-world, with all of its messiness and imperfections, does indeed appear to be in dire need of divine intervention. But economics properly and wisely done – economics done, for example, as it was done by Adam Smith, Ludwig von Mises, Frank Knight, F.A. Hayek, Fritz Machlup, Ronald Coase, Milton Friedman, Armen Alchian, James Buchanan, Gordon Tullock, Leland Yeager, Harold Demsetz, and Walter Williams – takes human nature, including humans’ limited cognitive abilities, as given. Most of the so-called “theoretical exceptions” to the economic case for free trade are relevant only in an alternative reality in which governance of humans’ daily economic and political affairs could actually be turned over to a god or to a mortal transformed into a god.

To describe, for example, how it is theoretically possible for government to use tariffs and subsidies to promote particular industries in ways that will ultimately improve the performance of the nation’s economy is of no more practical relevance than it would be to describe how it is theoretically possible for bioengineers to expertly alter the details of the human genome to give us all vision like that of eagles, hearing like that of owls, and lobster-like immunity from aging. In fact, the eventual success of such bioengineering is surely more likely than is the eventual success of such economic engineering.

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