Deirdre McCloskey reviews the book Power and Progress which calls for industrial policy

Two economists argue that, in the face of world-changing innovation, the state can make better decisions for society than the free market

See ‘Power and Progress’ Review: Technology and the New Leviathan. Excerpts:

"the invisible hand of human creativity and innovation, in the authors’ analysis, requires the wise guidance of the state.

This is a perspective many voters increasingly agree with—and politicians from Elizabeth Warren to Marco Rubio. We are children, bad children (viewed from the right) or sad children (viewed from the left). Bad or sad, as children we need to be taken in hand. Messrs. Acemoglu and Johnson warmly admire the U.S. Progressive Movement of the late 19th century as a model for their statism: experts taking child-citizens in hand."

"Since the 1920s, economists from John Maynard Keynes to Paul Samuelson to Joseph Stiglitz have been claiming, with increasing self-assurance though with surprisingly little evidence beyond the blackboard, that (1) private arrangements work poorly, (2) the state knows better, and (3) we therefore need more state. Messrs. Acemoglu and Johnson have long believed in this anti-liberal syllogism. Statism recommends a growing Leviathan, as Mr. Acemoglu argued equally eloquently in “Why Nations Fail,” a 2012 book with James Robinson."

"“Technology should be steered in a direction that best uses a workforce’s skills,” they write, “and education should . . . adapt to new skill requirements.” How the administrators of the Economic Development Administration at the Department of Commerce would know the new direction to steer, or the new skills required, remains a sacred mystery."

"Today we need the state to use its powers “to induce the private sector to move away from excessive automation and surveillance, and toward more worker-friendly technologies.”"

"Acemoglu and Johnson use economic history uncritically. When they want to praise Progressivism, they do not mention its fascination with racism, eugenics, compelled sterilization and nativism"

"When they want to tar capitalism with slavery, they appeal to the recent “King Cotton” school, popularized in the “1619 Project.” When they want to criticize the practice of surveillance in the early factories, they do not acknowledge the universality of surveillance in any organization, as analyzed for the Royal Navy in the economic historian Douglas Allen’s book “The Institutional Revolution” (2011). When they want to cast doubt on the gains from early industrialization, they speak of “long hours” and “crowded cities” as though traditional jobs in the field and workshop did not have long hours and as if those who chose to go to cities seeking work went there mindlessly."

"it’s disastrous for real science to close your ears to the other side. Science advances by conjecture and refutation, both. If history is to be used, it must be tested. Messrs. Acemoglu and Johnson don’t."

"During the past two centuries, the world has become radically better off, by fully 3,000% inflation adjusted. Even over the past two decades the lives of the poor have improved. The “great enrichment” after 1800 and its resulting superabundance has brought us out of misery. Even the poor workers who did not benefit in the short run have done so enormously in the long run. The number of people on the planet living on $2 a day has fallen to 1 billion out of 8, and the income average is $50 a day. The state didn’t do it, and forcing short-run egalitarianism or handing power to the Office of Economic Development can kill it, as it regularly has."

"The great fortunes they deprecate have the economic function of encouraging entry into the economy by other entrepreneurs who want to get rich. This competition cheapens goods and services, which then accrues to the poor as immense increases in real income."