… is from page 148 of the late Nobel-laureate economist W. Arthur Lewis’s 1955 book, The Theory of Economic Growth:
These innovators are always a minority. New ideas are first put into practice by one or two or very few persons, whether they be new ideas in technology, or new forms of organization, new commodities, or other novelties. These ideas may be accepted rapidly by the rest of the population. More probably they are received with scepticism and unbelief, and make their way only very slowly at first if at all. After a while the new ideas are seen as successful, and are then accepted by increasing numbers. Thus it is often said that change is the work of an elite, or that the amount of change depends on the quality of leadership in a community. This is true enough if it implies no more than that the majority of people are not innovators, but merely imitate what other do. It is, however, somewhat misleading if it is taken to imply that some specific class or group of people get all the new ideas.
DBx: Yes. And this reality is one that is denied, implicitly if not explicitly, by advocates of government planning of the economy – including advocates of industrial policy. Advocates of displacing market-directed allocations of resources with allocations imposed by government command never say where or how the planning officials will get the detailed knowledge these officials must have if their plans are to work as promised. But industrial policyists and other proponents of government ‘planning’ of the economy also never face up squarely to the fact that, insofar as their schemes are to be put into operation, they must prevent innovation. Creative new ideas for outputs, as well as for how to produce and distribute existing outputs, must be stopped if these ideas are not comprehended by the industrial policy – as they will certainly not be comprehended by the industrial policy because these ideas are creative.
Oren Cass and other industrial policyists might not realize it, but they are enemies of entrepreneurship and innovation. Because being accused of opposing innovation is so damning, few today will admit to it. But the conclusion is inescapable that, insofar as coercion is used to direct more resources to industries A, B, and C, and away from industries X, Y, and Z, innovative ideas that are inconsistent with this effort cannot be permitted if the effort isn’t to be abandoned. And given the very nature of innovation, it is impossible for industrial policyists to know that the value of whatever output is lost because of the squelching of innovation is less than is the value generated by the resource-allocation patterns that industrial policy brings about.
