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See What Is Unseen

Summary:
Here’s a letter to a new reader of Café Hayek: Mr. Vanyo: Thanks for your e-mail, in which you write that “examples of successful picking of winners are numerous enough to prohibit a straight-out argument opposing industrial policy.” I disagree for many reasons. Here are just two, one ethical and one economic. The ethical: Individuals should be allowed to spend and invest their incomes in whatever peaceful ways they choose. The burden of persuasion that must be met to justify the use of coercion to override these choices is very heavy; it’s one that neither the theoretical arguments for, nor the historical instances of, industrial policy begin to meet. The economic: The factual record is clear that the more free and open an economy, the more prosperous are the people in that economy

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Here’s a letter to a new reader of Café Hayek:

Mr. Vanyo:

Thanks for your e-mail, in which you write that “examples of successful picking of winners are numerous enough to prohibit a straight-out argument opposing industrial policy.”

I disagree for many reasons. Here are just two, one ethical and one economic.

The ethical: Individuals should be allowed to spend and invest their incomes in whatever peaceful ways they choose. The burden of persuasion that must be met to justify the use of coercion to override these choices is very heavy; it’s one that neither the theoretical arguments for, nor the historical instances of, industrial policy begin to meet.

The economic: The factual record is clear that the more free and open an economy, the more prosperous are the people in that economy and the more does that economy grow. This reality, of course, doesn’t mean that a government cannot, by deploying sufficient force, artificially arrange for some industry to thrive more than it would in a free market. But what no government can do is to achieve such an outcome without causing some other industry or industries – unknown and unseen – to artificially wither. Worse, because industrial policy necessarily stifles genuine innovation – true creativity, by its nature, disrupts government’s plans – the firms, products, and jobs that would have been, but are never, created increase in number yet remain invisible.

To point today to industries that succeed because of industrial policy and then conclude that freedom of trade doesn’t work makes no more sense than to point during the Spanish Inquisition to Catholic churches full of praying congregants and conclude that freedom of religion doesn’t work.

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

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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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