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Quotation of the Day…

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… is from page 73 of the May 9th, 2020, draft of the important forthcoming monograph from Deirdre McCloskey and Alberto Mingardi, The Illiberal and Anti-Entrepreneurial State of Mariana Mazzucato: “There is nothing in the DNA of the public sector,” Mazzucato declares, “that makes it less innovative than the private sector.” Oh, yes there is. One thing is clear: only people innovate. It is they who think, research, tinker, ponder, imagine, create, produce. Not the bureau, the office, the factory, the corporation, the market, the private sector, the public sector. The State and the market are simply settings, contexts, structures, in which actual people operate – for innovation or against it, wise improvements or waste, bettering or pillage. So the question is which setting is best for

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Don Boudreaux writes Quotation of the Day…

… is from page 73 of the May 9th, 2020, draft of the important forthcoming monograph from Deirdre McCloskey and Alberto Mingardi, The Illiberal and Anti-Entrepreneurial State of Mariana Mazzucato:

Quotation of the Day…“There is nothing in the DNA of the public sector,” Mazzucato declares, “that makes it less innovative than the private sector.” Oh, yes there is. One thing is clear: only people innovate. It is they who think, research, tinker, ponder, imagine, create, produce. Not the bureau, the office, the factory, the corporation, the market, the private sector, the public sector. The State and the market are simply settings, contexts, structures, in which actual people operate – for innovation or against it, wise improvements or waste, bettering or pillage.

So the question is which setting is best for people to innovate, sometimes succeeding, sometimes failing – a market of free people or a State coercing them to directionality? Are people more likely to be creative and innovate if they themselves, or their willing investors, pay the costs and earn the benefits of betterments, or alternatively if taxpayers foot the bill for remote bureaucrats to decide?

DBx: Deirdre and Alberto here unearth more evidence that much opposition to free markets springs from the mistaken belief that the economy is an engineering project.

Proponents of industrial policy and related kinds of economic interventions by the state – people such as Marianna Mazzucato (from the left) and Oren Cass (from the right) – conceive of economic activity as being much like painting by numbers. The only significant question, under this conception, is this: “Who will choose the image that is to be painted?” Once the image is chosen, it’s a purely mechanical process to actually produce the final product.

Proponents of industrial policy who, like Mazzucato and Cass, aren’t utterly without some sound economic instincts will admit that market forces can come in handy to emit the necessary incentives for workers to apply the paint according to the numbers chosen by government officials. But the ultimate objective of all this work is the production of images the forms and color palettes of which have been carefully chosen and prescribed by wise and apolitical government officials. (The conclusion that these government officials are wise and apolitical is justified by the presumption that they will heed the advice of scholars such as Marianna Mazzucato and Oren Cass.)

Completely absent in the work of people such as Mazzucato and Cass is an appreciation of the logic of market processes – processes driven by market prices, and by entrepreneurs’ profits and losses, generated when individuals spend their own money as consumers and invest their own money (and time) as investors. People such as Mazzucato and Cass simply cannot conceive that any economy that is not consciously guided to result in a pre-chosen image will result in anything but an ugly, chaotic mash-up of globs of paint.

People such as Mazzucato and Cass do not understand markets. And they especially don’t understand the knowledge-gathering and dispensing function of markets. Failure to understand markets is failure to understand the processes that generate market ‘outcomes’ and that these ‘outcomes’ are far better than any that could possibly be consciously chosen.

Pardon now my sudden change to a different analogy: It’s as if someone today catalogs all the parts of a pig and concludes that there’s nothing special about the countless individual forces of natural selection that result in the pig. A skilled engineer can, at least as well as blind natural selection, gather from nature all of the parts that make a pig and assemble them accordingly. In no time we’ll hear joyous oinking! Such is the belief of top-down thinkers such as Mazzucato and Cass.

And this skilled engineer can then design animals that are better than those ‘designed’ by blind, stupid, aimless natural selection. We can now have pigs that fly! Horses that talk! Cows that give chocolate milk! Dogs that don’t defecate! Cats that do our laundry! Humans with x-ray vision! Even rainbow-colored unicorns! It’s simply a matter of knowing how to consciously assemble atoms found in nature into these wonders. Indeed, the fact that natural selection hasn’t yet produced wonders such as these proves that natural selection is random and unreliable and must be replaced by conscious design and control.

It’s engineering, is all it is. We don’t rely upon natural selection to assemble our wristwatches. Why should we rely upon competitive free-market forces to assemble our economy?
…..

Changing the analogy yet again: Industrial-policy advocates think of the economy as a ship that needs a captain to conduct the economy to an appropriate destination. The captain directs the ship there by consulting a reliable compass.

This great helmsman might choose the destination himself or be of a democratic bent and, thus, consult the passengers on where they might like the ship to go. No matter. For the ship to arrive at a worthwhile destination, that destination must be consciously chosen and steered there by a trusty compass-consulting skipper. The passengers on this ship – even if captained by the democrat – inevitably discover that they are not so much passengers as they are conscripted crew under the command of the compass-clutching captain. They must do as the captain commands if the ship is to sail in the pre-selected direction.

…..

The fact that humanity over the past 200 or so years has experienced an unprecedented rise in material prosperity largely as a result of market forces that the likes of Mazzucato and Cass believe cannot possibly deliver any such outcomes is denied. The focus of the denial à la Mazzucato is that modern prosperity is really the result of state action. (“Oh, look, the state prescribed this and proscribed that! Our modern prosperity is, therefore, the consequence of this prescription and that proscription! Q.E.D.”) That there is a tight and positive correlation between the wealth of ordinary people and the freedom of their economies from state direction is legerdemained away.

The focus of this denial à la Cass is that things really aren’t so great after all. In fact, things stink. Working American males, Cass tells us, cannot today support their families in the way that they could support their families decades ago. Ergo, the American economy is stranded on the shoals. Mr. Cass & crew have the compass needed to direct the ship back out to sea, through waters calm and with breezes favorable, toward the Promised Land.

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Don Boudreaux
He is a professor of economics at George Mason University in Fairfax, Virginia. Previously, he was president of the Foundation for Economic Education.

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