Oren Cass of American Compass recently published an article – co-authored with his colleague Chris Griswold – in the New York Times that I just started reading. In it, they advise Republicans on what policies to adopt if the GOP wins big in November. But it was the following passage that particularly caught my attention:
Our organization, American compassdeveloped a conservative agenda that replaced blind faith in free markets with policies focused on workers and their families.
To accuse proponents of free markets of being motivated by “blind faith” is a good phrase. But with all due respect, it’s also a load of nonsense.
Those of us who support free markets are not under the spell of blind faith. We have a well-developed theory, with plenty of history and empirical research to back it up, on how innovation is spurred and resources are allocated efficiently by market prices. (Among the many works that lend intellectual credence to the support of competitive market processes are Hayek’s paper “Use of Knowledge in Society”, the economics of Armen Alchian, and the historical and theoretical works of Deirdre McCloskey The empirical literature that shows that economic freedom is essential to promote all the major aspects of life that we want, such as growth, better education, a way out of poverty, a drop in crime, etc.) As long as consumers spend and investors invest their own money and are allowed to keep most of the gains from good decisions while suffering the losses from bad decisions, resources tend to be freed from less productive uses and reallocated to more more productive.
At the very least, the competitive market process allocates resources better than a system in which politicians and bureaucrats – spending other the people’s money – overriding market allocation with various forms of subsidies, restrictive licensing and protective tariffs. National security concerns might justify narrowly targeted restrictions on competitive markets, but Cass and Griswold were writing here about how to improve the economy, not how to strengthen national defense.
No offense, but those who really rely on blind faith are proponents of industrial policy such as Cass and Griswold who continue to argue that, in the face of ample evidence to the contrary, government officials can allocate resources better than the price system. At the very least, unless and until they explain how politicians and bureaucrats will obtain and use the knowledge that markets obtain and use with remarkable success every moment of every day, and how to prevent fiascos and the cronyism produced by past attempts at industrial policy, Cass and Griswold should not accuse people other than their fellow industrial policy supporters of being guided by blind faith.
Véronique de Rugy is a senior researcher at the Mercatus Center and a syndicated columnist at Creators.