Again, He Can’t Possibly Know What He Presumes to Know
Here’s a note to first-time correspondent:
Mr. H__:
Disagreeing with my criticisms of Oren Cass, you write
You commit the same wrong you accuse Dr. Cass of. Maybe Dr. Cass can’t be absolutely sure his tariffs will help the economy, but you market fundamentalists can’t be sure they won’t either. You can’t pull the ‘you can’t know’ card on Dr. Cass without someone else pulling it on you. So I am now pulling it on you. Even at its best the free trade case has the same problem.
With respect, you’re mistaken. While it’s possible that protectionism will outperform free trade at improving the economy, the appropriate question is this: Is this outcome plausible? The answer is no.
We “market fundamentalists,” as you derisively call us, have in support of our policy what Mr. Cass and other protectionists don’t have in support of theirs – namely, a theory of how the values of alternative uses of resources are generated, transmitted, and acted upon in ways that tend over time to displace uses of resources that produce less value with uses that produce more value. What’s more, our theory has stood the test of time and of empirical investigation.
Contrary to the claims of Mr. Cass and other protectionists, this theory isn’t based on “faith” in free markets but on sound, empirically supported reasoning about the formation and role of prices and other market signals. This reasoning reveals how these signals align with the interests of individuals to incite market participants to use resources in ways that take account of the relative scarcities of different resources as these relate to market-participants’ many different preferences – including, by the way, their preferences for different kinds of employment.
At no time does the market work perfectly (whatever that might mean). Errors are always being committed. But when individuals are free to spend their money as they wish, and entrepreneurs are free to compete for buyers’ dollars, there are sharp incentives to uncover these errors and to take corrective action.
Again, Mr. Cass has no such theory. He tells us literally nothing about how the decision-makers who he wishes to empower to protect these industries and to subsidize those firms will get and respond to the detailed, nuanced knowledge that they must have if their interventions are to improve the general welfare of people in the country. He simply assumes that the interventions he proposes will work as he imagines and without any negative unintended consequences. We are to take it on blind faith that Mr. Cass, somehow, has in his brain enough of the vast bits of knowledge dispersed throughout the global economy to equip him and his advisees to beneficially override the resource-allocation patterns that emerge in free markets. That’s not a faith to which I can subscribe.
Sincerely,
Donald J. Boudreaux
Professor of Economics
andMartha 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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