Quotation of the Day…

(Don Boudreaux)

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… is from page 30 of Edwin G. West’s 1990 book, Adam Smith and Modern Economics:

According to Adam Smith (and later to Hayek) information about which new industries have the greatest promise cannot be accumulated in a political body, let alone in the head of a single government functionary or planner. Such knowledge is dispersed throughout the land, and is often discovered in unexpected quarters.

DBx: Although proponents of industrial policy don’t realize this fact, the fact is that they fancy themselves as possessing god-like knowledge of the future. (Their failure to realize this fact is itself a telling fact!)

If a person were openly to consult a crystal ball and, after rubbing that ball, inform the the general public and government officials that these particular products (or kinds of products) and those particular firms (or sorts of firms) are “the industries of the future,” that person would be openly ridiculed and laughed at. Rightly so.

Yet matters mysteriously differ for a person who openly consults his or her imagination and some data gathered necessarily from the past (and always at a high level of aggregation compared to the details of actual on-the-ground and ever-changing economic reality). When such a person, after consulting said imagination and data, informs the general public and government officials that these particular products (or kinds of products) and those particular firms (or sorts of firms) are “the industries of the future,” this soothsayer is treated as a serious thinker, a true scientist, whose prophesies are to be taken seriously and, indeed, perhaps coercively acted upon.

You show me someone who proposes industrial policy as a means of enriching the people of a country and I’ll show you someone who ought to be taken with all the seriousness that we accord a palm reader.