Corcoran on Industrial Policy and Central Planning

Regular reader and frequent commenter Kevin Corcoran sent me his thoughts on a post on Joey Smallwood and art policy. We agree that his long comment is better as a standalone post. Here it is:

On the one hand, you can easily read about Joey Smallwood’s founding in the article [DRH] Mentioned and laughed at his indomitable incompetence. But at the same time, this story shows a problem with the general response to a common criticism of industrial policy and central planning.

The common criticism is that politicians necessarily intervene in areas where they have no competence, and cannot. This is not a claim that politicians are stupid, of course: George Will embodies this Conservative sensitivity, “The simple, indisputable truth is that everyone knows almost nothing about almost everything. Fortunately – yes, fortunately – this is becoming truer by the day, by the hour, by the minute. As humanity’s store of knowledge grows, so does much that is theoretically known but not practically known.”

But, the criticism continues, legislators, whose powers of knowledge are no different than anyone else’s, still put their finger on almost everything. PJ O’Rourke has a fun section Parliament of whores in which he describes about two dozen different subjects that the Congress will act on that week, and observes “that, one would think, about the limits of man’s capacity for skill. To converse with twenty-five different subjects at once is as much as we can ask of one man. However, we That’s less than 10 percent of what a congressman wants. In the same week in 1990, 250 other items were also on the congressional calendar. O’Rourke divulged these items, including fish hatcheries, outer space, the Caribbean economy, nutrition labeling, “and, of all things, reducing paperwork.” and listed some of the unrelated issues. Then he quipped, “We expect our congressman to know more about each of these things than we do. We expect him to make wiser decisions about all of them than we can. And we expect Let that Congressman make that wise and wise decision, regardless of his political or financial interests.”

A common response to this criticism is to admit that politicians cannot necessarily be experts in all these areas, but that is okay because politicians can consult people who are. is Each expert in this area. This would allow politicians to cast votes that are informed by multiple lines of expertise and allow their decision-making to benefit from that accumulated expertise despite their inability to acquire that knowledge directly.

However, this response cuts very little ice. The simple truth is that knowing who is an expert in a particular area, and how well their expertise will apply, requires a significant amount of knowledge. Smallwood obviously did not know how to set up a fishing industry to catch herring. He instead hands it over to Icelandic herring fishermen, with less impressive results. Maybe they were bad fishermen, or the fishing methods successful in Iceland were not suitable for Newfoundland. Regardless, Smallwood, lacking knowledge of fishing, also lacked the knowledge to identify proper fishing skills. But instead of allowing a competitive fishing industry to emerge in the open market, he picked his chosen “experts” and financed them at government expense. The results should surprise no one.

Now, reconsider the situation of the average member of Congress. Consider the hundreds of different issues they vote on and regulate in any given year. Does anyone seriously believe that each member of Congress is capable of accurately identifying the best and brightest scholars for all these various subjects with relevant expertise, which will be properly applied in each situation? And will these politicians wisely take and understand the advice given to them and reflect it correctly in their votes? Does anyone believe that this is an accurate description of how the various federal regulators operate when they pass thousands of new pages of regulations every year on every topic imaginable? To borrow a line from Robert Heinlein, if you believe that, I have a wonderful offer for you. No checks, please. Cash only, and in small bills.

I agree with Kevin.

Let me, DRH, clarify what I think Will’s point is in writing, “Fortunately – yes, fortunately – this is becoming true by the day, the hour, the minute.” The reason it is fortunate is that it is a necessary consequence of something fortunate: namely, the ever-widening international division of labor, which makes almost everyone better off. The greater the division of labor, the more specialized we are and therefore, the more productive.

Also, to drive home Kevin’s point, yes, Joey Smallwood made a lot of mistakes without consulting the experts. But the whole original article from which I quoted shows how often he did Consult experts who have given bad advice. You still need to have enough skills to pick a good expert.

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