Thursday, May 09, 2013

Nobody Knows How to Make a Pencil or Why Government Locks In Failure

Kevin Williamson has a great article over at National Review Online talking about how in the private sector everything gets better and cheaper all the time, e.g. mobile phones, and how

“We treat technological progress as though it were a natural process, and we speak of Moore’s law — computers’ processing power doubles every two years — as though it were one of the laws of thermodynamics. But it is not an inevitable, natural process. It is the outcome of a particular social order.”

He goes on to show how competitive markets allow for competitors to come and go, rise and fall, and how important it is for failure to be possible as contrasted with institutionalized failure when politics takes over and government tries to pick winners and losers:

“Politics creates the immortal corporation. Amtrak and the U.S. Postal Service are two institutions that would have failed long ago if not for government support — subsidies for Amtrak, the government-chartered monopoly on letter delivery for the postal service. The cost of their corporate immortality is not only the waste associated with maintaining them, but also the fact that their existence prevents the emergence of superior alternatives.”

It comes back to “the knowledge problem” or as Hayek put it, the fatal conceit that a small group of people or an individual can have all the knowledge necessary to direct an entire industry (think healthcare, e.g.) or an economy. This article is one of the best discussions of this I have seen.

Read the whole thing.

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