My good friend, Don Boudreaux, who blogs over at cafehayek.com, sent this letter to the Pittsburgh Post-Gazette in response to a piece in that paper’s Sunday edition. It is worth reprinting below.
I would also like to take this opportunity to encourage my readers to visit cafehayek.com for a treasure trove of insightful economic commentary. The site is named after Nobel laureate F.A. Hayek, who is frequently mentioned in my own work regarding the “knowledge problem.” The charming sketch of Mr. Hayek (right) is taken from professor Boudreaux's blog.
Dear Editor:
You endorse “industrial policy,” supposing that it will somehow improve the economy (“Fighting words: It's time for Obama to talk tough on the economy,” September 14). You're mistaken.
By guaranteeing that certain firms, industries, and jobs will survive, government industrial policy shields these producers from competition. Thus protected, they escape the need to find greater efficiencies in production and the necessity of diligently satisfying consumer demands. And by locking up resources in politically favored industries, industrial policy makes it vastly more difficult for entrepreneurs to start new firms and to produce new products. Pioneering and creative firms, after all, inevitably threaten the existence of older firms — by competing against older firms both for consumers' dollars and for workers and capital.
The job security guaranteed by industrial policy is the security of serfs on feudal manors and not that of free and prosperous people.
Sincerely,
Don Boudreaux
Chairman
Department of Economics
George Mason University
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