At Least Listen to Adam Smith

(Don Boudreaux)

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Here’s a letter to American Affairs:

Editor:

Put aside the questionable accuracy of Michael Lind’s assertion that a significant fraction of Democrats are embracing “economic neoliberalism” while Republicans are having a “fling with radical free market libertarianism” (“Tripartism, American Style: The Past and Future of Sectoral Policy,” Spring 2020). Instead, focus on the utter vacuity of his case for adoption in the U.S. of industrial policy.

Mr. Lind, of course, is at no loss for words in describing all the good that he imagines will be the fruit of such a policy. Yet none of his 8,300 words – some of which, it’s true, he wastes in the disgraceful task of caricaturing Milton Friedman and F.A. Hayek – give any hint about just how the politicians and bureaucrats invested with power to superintended and override market processes will acquire the knowledge necessary to perform the splendors that in Mr. Lind’s imagination they will perform.

This silence is no small matter. Nothing is easier than asserting that a government charged with achieving Splendid Outcomes by overriding market processes will, by being so charged, thereby achieve said Splendid Outcomes. The difficulty – and it is monumental – lies in arranging for government officials actually to gather, process, and apply productively the unfathomable amounts of detailed and ever-changing local knowledge that must be gathered, processed, and applied productively for schemes such as those imagined by Mr. Lind to succeed. (Never mind here the additional problem – also monumental – of ensuring that these government officials, armed with massive amounts of discretionary power, will use their power only apolitically.)

Yes, yes – the point I make here is associated today with the likes of Hayek and Friedman. Your readers might therefore dismiss it as the ranting of an equally benighted ideologue. So let me end instead with some words from Adam Smith – who, I feel it necessary to point out, never advised the Pinochet regime:

What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.*

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

* Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations (Indianapolis: Liberty Fund, 1981 [1776]), Book IV, Ch. ii, page 456.