I challenge Oren Cass to tell the world how the government agents he would empower to superintend and override market signals will get the detailed knowledge they must have in order to have any hope of success at improving human welfare.
Mr. Yascha Mounk
Mr. Mounk:
In his discussion with you (“Oren Cass on the Case for Tariffs,” February 8) Oren Cass says about the case for free markets that
it puts excess faith in markets to always deliver the best possible outcome, and defines that outcome almost entirely in terms of consumer welfare. We embraced this quite formal economic model that said the goal of markets is to let people consume as much as possible, and the less work you have to do in order to consume, the better. And the way we’re going to get that is to just get the government out of the way and let markets rip because markets always accomplish that.
This description reveals deep misunderstanding.
First, the case for free markets is emphatically not the straw-man insistence that they will “always deliver the best possible outcome.” Instead, it’s the recognition that markets over time generally deliver better outcomes than does government.
Second, the case for free markets isn’t grounded in “faith” but in facts and theory. Consult history: more-free economies deliver higher standards of living to their denizens than do less-free economies. And sound economic theory reveals the reasons why. We’ve a well-established and credible theory of how individuals, as producers and consumers, in free markets are both informed and incited by prices and other market signals to adjust their actions to the physical realities of resource scarcities and to the preferences expressed by their fellow human beings – adjustments that tend over time to produce more human satisfaction out of inherently scarce resources.
In contrast to those of us who Mr. Cass derisively dismisses as “market fundamentalists,” it is Mr. Cass and Co. who rest their policy recommendations on faith – faith that government officials can acquire the detailed knowledge they must possess to intervene productively, and faith that these officials will act in the public interest.
Scour all that Mr. Cass has written – and he’s written volumes – in search of even an attempt to explain how the politicians and bureaucrats who he would empower to superintend and override market signals will acquire the detailed knowledge necessary for his schemes to succeed. You’ll find nothing. Zero. It doesn’t even occur to him that there’s a ‘knowledge problem’ that must be addressed if the interventions he proposes are to have any hope of working. That government agents will improve on market processes is a proposition that he takes simply as a matter of faith. (Mr. Cass might respond that the economic theory of resource allocation is marred by this or that flaw, but at least we have a theory – one quite well-tested – of how markets allocate resources in welfare-enhancing ways. He, in contrast, has literally nothing along these lines other than, well, faith.)
As for Mr. Cass’s allegation that the case for free markets is about maximizing consumption and minimizing production, that, too, is a ridiculous straw man – but this letter is already too long.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
