Editor:
Ryan Bourne exposes the political nada of Oren Cass and other ‘national conservatives’ who advocate industrial policy to improve the US economy.National conservatives cannot aspire to political realities” April 17) What is surprising is the frequency of rent-seeking by Mr. Cass and Co. and the frequency of adultery and sexual immorality when politicians have the power to allocate resources. When women of the night have the power to manage prostitutes.
But the issue of industrial policy has a second flaw and industrial policy has failed despite the miraculous depoliticization of government officials. The second omission is inevitable ignorance. Mr. Cass could successfully instruct the government on how to achieve some tangible results, such as increasing employment in manufacturing. But neither he nor anyone can know whether the results of this government-engineered destruction of resources will be good for the country.
When government uses industrial policy to allocate resources to manufacturing activities selected by industrial-policy designers, how many of these resources come from other manufacturing activities? How many are from the service sector? How many are from agriculture and extractive industries? The unfathomable complexity of the modern economy makes such knowledge nearly impossible. But even if we know that X tons of steel, Y acres of land, and Z hours of labor have been diverted from the service sector (from medical research facilities to construction and human resources and online retail warehouses). How do we know that this altered allocation of resources will grow to the net benefit of the country? How do we know that the losses from these weakened service sector jobs are not greater than the gains from the manufacturing sector? How do we know that the jobs destroyed in the service sector are fewer than the jobs created in the manufacturing sector? How do we know what impact this forced wealth creation will have on innovation in the manufacturing sector or in other sectors? (Do we expect subsidized and protected firms to be more innovative?) And how do we know what impact this altered innovation will have on the nation’s overall well-being?
We cannot know. No one can. There is no source of information for Oren Kass or anyone else that tells us that the result of any industrial policy will be economic improvement for the country.
In a free market where people spend and invest their own (only their own) money, resources are allocated based on market value and at least transferable asset values. some Information about consumer preferences, resource scarcity and expected economic changes. This information is not perfect, but at least it is real, objective, and – relative to the success of market economies compared to non-market ones – very good. In contrast, the only ‘knowledge’ used to allocate resources with industrial policy is a mixture of the personal preferences and idiosyncrasies of politicians, bureaucrats and intellectual pseudo-rulers.
Industrial policy markets not only censor the valuable information that millions of market participants continuously extract from the economic activities of the present moment, but replace it with the armchair speculation of a handful of individuals who arrogantly believe they have godlike powers. But also from their think-tank collections or political chambers, accurately predicting the future in unattainable detail.
Let’s give the last word to Adam Smith:
A statesman, who attempts to direct private men in what manner they should employ their capital, not only burdens himself with the most unnecessary attention, but assumes an authority which can be safely trusted to no one, but to no council. nor the senate at all, and no place so dangerous as the folly and arrogance of a man deeming himself fit to exercise.*
best regard
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
* look out Book IV, Chapter 2, Article 10 of Adam Smith, The question of the nature and causes of the wealth of nations (1776)
