Blind Faith Baloney
American Compass’s Oren Cass recently had a piece – co-authored with his colleague Chris Griswold – in the New York Times that I just got around to reading. In it, they advise Republicans on what policies to push if the GOP wins big in November. But it’s the following passage that especially caught my eye:
Our organization, American Compass, has been developing a conservative agenda that supplants blind faith in free markets with policies focused on workers and their families.
Accusing proponents of free markets of being motivated by “blind faith” is a good soundbite. But with all due respect, it’s also a load of baloney.
Those of us who support free markets are not remotely under the spell of blind faith. We have a well-worked out theory, with lots of history and empirical research to back it up- of how innovation is spurred, and resources are allocated efficiently by market prices. (Among the many works that give intellectual credence to support for competitive market processes are Hayek’s “Use of Knowledge in Society” paper, the economics of Armen Alchian, and the historical and theoretical works of Deirdre McCloskey. The empirical literature that shows that economic freedom is key to promoting all the major aspects of life we want like growth, better education, a lift out of poverty, a decline in crime, and more.) As long as consumers spend, and investors invest, their own money and are allowed to keep the bulk of the gains of good decisions while suffering the losses of poor decisions, resources tend be released from less productive uses in order to be reallocated to more productive uses.
At the very least, the competitive market process allocates resources better than does a system in which politicians and bureaucrats – spending other people’s money – override the market’s allocation with various forms of subsidies, restrictive licensing, and protective tariffs. National-security concerns might justify narrowly targeted restraints on competitive markets, but Cass and Griswold were writing here about how to improve the economy, not about how to strengthen national defense.
No offense, but those who truly rely upon blind faith are industrial-policy supporters such as Cass and Griswold who continue to assert that, in the face of lots of evidence to the contrary, government officials can allocate resources better than can the price system. At the very least, unless and until they explain just how politicians and bureaucrats will get and use the knowledge that markets get and use with remarkable success each moment of each day, and how to prevent the fiascos and cronyism produced by past attempts at industrial policy, Cass and Griswold shouldn’t accuse people other than their fellow supporters of industrial policy of being guided by blind faith.
Veronique de Rugy is a Senior research fellow at the Mercatus Center and syndicated columnist at Creators.