The Hayek question

Thatcher was right. This is my reaction to reports that Dominic Cummings regards Brexit as a way of getting out of limits on state aid and so enabling the government to funnel cash towards the UK’s own future big tech companies.

The problem with this is that, as Thatcher said, the state cannot pick winners. Corporate growth is largely unpredictable. “The stochastic element is predominant” concluded Alex Coad in one survey. “Corporate growth rates are random” found Paul Geroski in another (pdf). “There is low predictability [of corporate earnings growth] even with a wide variety of predictor variables” found (pdf) Louis Chan, Josef Lakonishok and Jason Karceski in a third.

This fact explains why fund managers don’t beat the market. David Blake has concluded: "the vast majority of fund managers in our data set were not simply unlucky, they were genuinely unskilled." It's also why the performance of venture capital trusts has been very variable. In the last five years, one fund trebled investors’ money but two others lost half of it. A big reason for this is that, as Charlie Cai has shown, it is prodigiously difficult for companies to grow and investors often under-estimate all the obstacles to growth.

Investors cannot, then, pick winners. Success is unpredictable. And not just in the corporate sector. It’s true in films: United Artists and Universal both rejected Star Wars. It’s true in publishing: J.K Rowling and C.S Lewis saw their manuscripts rejected many times. And in music: Elvis Presley was told to go back to truck-driving and Decca famously rejected the Beatles on the grounds that "guitar groups are on the way out."

 As William Goldman said, nobody knows anything.” In particular - as my examples show - extreme success seems unpredictable.

This isn’t to say that Thatcher’s laisser-faire approach to industrial policy was right. There’s much that governments can do: fund and promote basic research; ensure that start-ups and small firms aren’t held back by a lack of finance or by the wrong intellectual property regime; ensure a good supply of skilled workers, some from overseas; and so on.

What they cannot do, though, is spot winners.

This is because Thatcher’s mentor Friedrich Hayek was right. Markets are complex processes, knowledge of which is dispersed, fragmented, tacit and not collectable by a single mind:

In the study of such complex phenomena as the market, which depend on the actions of many individuals, all the circumstances which will determine the outcome of a process…will hardly ever be fully known or measurable…[We] cannot acquire the full knowledge which would make mastery of the events possible.

The issue here is a fundamental one - what can governments know? - that should be behind many issues in economic policy. For example:

 - How can we run counter-cyclical policy, given that nobody can reliably predict recessions? For me, this is an argument for stronger automatic stabilizers such as better welfare benefits. It’s also a case for having the right policy infrastructure in place, so that (for example) the Bank of England can quickly write us all a cheque.

 - Do local authorities really have sufficient knowledge of what worthwhile things need doing, and the ability to scale these up and down, to make a job guarantee feasible? For me it is this question, rather than macroeconomic considerations, that is key to the desirability of scheme.

 - Can governments know enough about low-income families to target support to them? Many, of example, move in and out of work often and see their hours fluctuate. Can we design a benefit system that responds to such variation, or is a high citizens income a simpler alternative?

 - How best should banks be regulated? The trend has been towards increased complexity. But Andy Haldane has argued:

As you do not fight fire with fire, you do not fight complexity with complexity. Because complexity generates uncertainty, not risk, it requires a regulatory response grounded in simplicity, not complexity.

It might be that high capital requirements, or even nationalization, are simpler alternatives.

 - Can bosses know enough to control large organizations? If, on the other hand, knowledge of the organization is also fragmented, there’s a case for greater workers’ say.

Hayek’s question – what can governments know? – should then be a fundamental, ubiquitous one.

But it’s not. This, I fear, is due partly to a selection effect. Politics and opinion-mongering selects in favour of bumptious prats who over-estimate their knowledge. Which is an obstacle to good policy.

Cummings is, I think, wrong to think the state can pick winners. His error is not an idiosyncratic one, however, but rather the product of systemic dysfunction.

Comments

[dilbert dogbert]

China and Japan instantly came to mind.

[dilbert dogbert]

Andy Haldane is wrong.
California is fighting fires with fire like for ever. Controlled burns. Backfires.

[Dipper]

I think Cummings is probably aware of this trap.

[Jan Wiklund]

You should discuss this with the Japanese, the Chinese and the South Koreans. Every one of their world market winners is state sponsored from the beginning.

See for example Alfred Chandler's Inventing the electronic century, about how the American radio business got extinct thanks to focus on "owner value", while the Japanese Department of industry guided and goaded their Japanese competitors to success.

And this was also how the Europeans made it in the postwar age, by the way. Not least the Norwegians and the Finns who were not very predominant in industry before the 60s.

[Blissex]

«You should discuss this with the Japanese, the Chinese and the South Koreans. Every one of their world market winners is state sponsored from the beginning.»

They bet on already known winners, that's one good way to do it; they also bet on a number of losers, but eventually stopped funding them.

[Blissex]

«reports that Dominic Cummings regards Brexit as a way of getting out of limits on state aid and so enabling the government to funnel cash towards the UK’s own future big tech companies.»

What he wants to do is not just that, he wants to give state aid *without the UK's trade partners imposing anti-dumping tariffs and restrictions* in response to that.
It is just another example of cakeism: the UK exits the EU to protect UK companies and markets, and subsidise UK exports, but other countries must not protect their own companies from the subsidised imports of state funded UK companies.
The EU are of course well aware of that, thus their insistence on "level playing field" rules in exchange for trade concessions to the UK.

[Blissex]

«getting out of limits on state aid and so enabling the government to funnel cash towards the UK’s own future big tech companies. The problem with this is that, as Thatcher said, the state cannot pick winners. Corporate growth is largely unpredictable.»

There are two pretty big mistakes here:

* There is a big difference between picking individual corporations as winners, and picking *sectors* as winners. That's not that difficult looking at what has succeeded recently in other countries.

* Thatcher and the other thatcherites did pick winners on a massive scale at the sector level, by pouring immense amounts of taxpayer money (via the Treasury or the BoE) as indirect and direct state aid for the property and finance sectors (less for pharma and weapons).

«What they cannot do, though, is spot winners.»

But they can create "winners": the thatcherite governments of the past 40 years also gifted those winners (finance and property mainly) with extraordinarily favourable policies, such as Right to Buy, Help to Buy, and decades of government induced squeeze to keep interest rates falling, never mind using up the scottish oil windfall to improve market conditions for property and finance.

And thanks to the huge provision of state aid the incomes of executives and rentiers in property and finance have been booming for decades.

In a wider sense neither sector is a "winner": property produces pretty much nothing, and finance according to NN Taleb actually loses money over the cycle, so produces less than nothing (in the sense that it draws down its capital, so it has to be recapitalized by the government every time there is a crisis).

[Blissex]

«how the American radio business got extinct thanks to focus on "owner value", while the Japanese Department of industry guided and goaded their Japanese competitors to success.»

The difference is that in the japanese system what matters is total value added of a business, that is being productive, while in the anglo-american (thatcherite/reaganite) one only the share of value added that goes to executives (and with a lower priority to owners, see banks) matters.

That is in the anglo-american system a business that produces valuable output and thus good value added but little of it goes to executives (and owners) is regarded as inferior to one that doesn't but a lot of it goes to executives (and owners). The classic example of the latter case is asset stripping done by private equity on fading businesses.

Of course in the UK things have gone to an extreme: the favoured sectors are those that produce zero or negative value added like finance and property, because they give huge returns to executives in the case of finance and to owners in the case of property.

[James Charles]

Here: https://www.techinvest.co.uk/download/techinvestsample.pdf

is a group that has been successful for a number of years?

[Jan Wiklund]

"The difference is that in the japanese system what matters is total value added of a business, that is being productive, while in the anglo-american (thatcherite/reaganite) one only the share of value added that goes to executives (and with a lower priority to owners, see banks) matters." (11 Sept 10:22)

Certainly, the point of government picking winners is that one doesn't care of value added going to executives or owners. Of course, one has to be rather un-corrupt to do that. So it is perhaps no good idea for the UK. But that is not the same as being no good idea at all...

[Frank Little]

Hayek a mentor? According to Enoch Powell, Thatcher did not understand monetarism.

[ltr]

...Thatcher said, the state cannot pick winners. Corporate growth is largely unpredictable....

[ The question then should be how has China developed so spectacularly through these last 40 years? Has China picked winners or just created a climate in which winners are able to emerge?

I would argue that what China has done and is continuing now is developing an infrastructure that allows for winners to emerge over and over. Just now the Chinese leadership is emphasizing even more of an emphasis on infrastructure development. ]

[ltr]

http://www.xinhuanet.com/english/2020-09/10/c_139356487.htm

September 10, 2020

Xi stresses building modern logistics system as support for new development pattern

BEIJING -- Chinese President Xi Jinping on Wednesday stressed coordinated efforts to advance the construction of a modern logistics system to provide strong support for a new development pattern....

http://www.xinhuanet.com/english/2020-09/12/c_139361891.htm

September 12, 2020

Xi stresses development of science, technology to meet significant national needs

BEIJING -- Chinese President Xi Jinping on Friday stressed continuing to advance the development of science and technology to a deeper and broader level....

[georgesdelatour]

@Blissex

I don’t think Cummings is especially interested in subsidising existing UK businesses so that they can sell to the EU at lower than the cost of production. Selling cut-price English apples to the French isn’t what this is about.

It’s about tech. The Huawei 5G fiasco shows how we’re lagging behind China, and Cummings wants to correct that. The EU is also conspicuously lagging behind the USA; there are no European companies comparable to the US FAANG companies. I don’t know exactly why this is, but I suspect government policies have something to do with it.

The USA uses its defence budget to help tech. In the 1980s, when the US seemed to be falling behind Japan, Ronald Reagan launched the Star Wars program - officially against the USSR, unofficially against Japan. It succeeded against both, bankrupting the USSR, and creating a conducive environment for future FAANG companies to grow.

China uses its censorship policies to help tech. The Great Firewall and the banning of Google are only partly about preventing Chinese citizens from reading about what’s happening in Xinjiang. They’re also about ensuring that Chinese companies can grow in the domestic market, shielded from US domination.

[ltr]

China uses its censorship policies to help tech....

[ What nonsense, the need is to limit the ceaseless flow of propaganda meant to undermine China. Sort of like the collective UK mass media determined to undermine and successful at undermining the Labour Party of Jeremy Corbyn.

American policy towards China is in all meant to cripple China technologically. This of course will not happen. ]

[georgesdelatour]

@ltr

Does one reason automatically exclude another?

If China believes the USA is trying to cripple it technologically, that makes it even more likely they'll pursue a policy which tends to limit the role of the US big players in the domestic Chinese market. This in turn makes more room for Alibaba and Weibo to grow.

BTW who would be a Chinese equivalent of Jeremy Corbyn? Bo Xilai?

[Blissex]

«Certainly, the point of government picking winners is that one doesn't care of value added going to executives or owners.»

That's COMMUNISM! :-)

[Blissex]

«I don’t think Cummings is especially interested in subsidising existing UK businesses so that they can sell to the EU at lower than the cost of production.
It’s about tech.»

Like everyone else, there are several sides to Cummings: one is indeed the "dreamer", the one that would like for the UK to be like California. But Cummings also has a side as an electoral strategist, and as a Conservative strategist.

The Conservatives and their electoral coalition could not care less about "tech", they make enormous profits from finance and property rentierism, and that is what really matters.

«The Huawei 5G fiasco shows how we’re lagging behind China»

But has been *deliberate strategy*: why waste money doing that stuff in "high wage" UK when the asians will bend over to work twice as hard for way less than half the wage? Why give the trade unions an opportunity to grow again "infecting" high capital intensity industrial businesses?

Also making stuff, "active income" sectors, is so vulgarly common, leave it to the asians, true gentlemen don't soil their hands with that kind of stuff, they do "deals", they work in "passive income" sectors like property and finance.

«and Cummings wants to correct that»

He dreams to correct that, but fat chance.

«The EU is also conspicuously lagging behind the USA; there are no European companies comparable to the US FAANG companies.»

There are some big companies, and some smaller imitators of the FAANG companies, but indeed the best rivals of the FAANG companies are in south Korea and China (and in a reduce way in Japan and Taiwan).

«I don’t know exactly why this is, but I suspect government policies have something to do with it.»

I think I know, and it is that the valuable ones among the FAANG are "scalable" businesses, that is they are "winner takes all" businesses, In business jargon they are like oil wells: only 1 in 13 drillings gushes oil, and a much smaller proportion is big gushers, and when they are big gushers there is usually a need of massive amount of capital before they achieve scale. This requires investors willing to place relatively big bets that almost always fail, and this is only possible when tax rules are favourable and there is huge inequality, so many very rich people who can well afford (and often hardly notice) to lose the odd dozen million dollars. Secondarily the huge USA single market helps a lot.

In most EU countries capitalists are not willing to place huge bets with a low chance of a very big payoff, they want quicker and safer paths to profitability, and the EU single market is still not quite as smooth as the USA one.

Mainland China, south Korea (and to a lesser measure Taiwan island and Japan) can compete with that because direct or indirect government support helps big companies do that kind of bet, and in China there is a huge and smooth single market too.

BTW most FAANGs are overrated: Amazon is in large part a delusion, and Apple is a small/niche/luxury market company that has become mass market only because there is mechanism of vendor financing to buy their products with consume debt.

[Blissex]

«It's also why the performance of venture capital trusts has been very variable. In the last five years, one fund trebled investors’ money but two others lost half of it.»

While of course half of venture capital funds are below average, and the average is unflattering as to final returns, variability over *time* is part of the essence of venture capital funds and "hedge" funds: they take big directional bets on low probability, high payoff ventures. As in the previous comment, like drilling for oil.
So high variability is no indication of bad performance, even if bad performance of venture capital funds is common. The typical duration of venture capital funds is 10 years to reflect that.

The real problem of venture capital funds is that while capital partners have limited liability, managing partners have no liability, and actually in the classic 2-20 arrangement have a guaranteed floor of 2% of the fund per year.

[robert mitchell]

The problem is that Hayek thought market prices reflected all information so government just has to fund the companies with the highest stock price. Of course that is ridiculous because price, as any trader will tell you, is a liar. Hayek was wrong.

[Bill]

To those that are saying the Chinese government picks winners. It does not. State aid specifically favours one business over another. Which the Chinese government does not do. They favour each business equally, which is what EU state rules do.

EU state rules do not prevent a government investing a business. It also does not prevent a government from nationalisation them either.

What the Chinese government does is dumping by controlling the convertibility of their currency.

[James Charles]

The 'secret' of China's 'success'?

“China initially had a soviet-style
40:48 economy but in 1978 a new leader came to
40:53 power in China Deng Xiaoping and he
40:56 analyzed the situation and he concluded
40:58 that the Soviet system is doomed to
41:01 failure and that's of course dangerous
41:04 he concluded for you know for the
41:08 country and it's better to abandon this
41:10 system and instead he looked at other
41:14 countries that had a more successful
41:16 monetary system such as Japan and
41:19 Germany and the US and he concluded well
41:23 we need to decentralize banking and so
41:26 when he came to power 1978 what what was
41:28 the key one of the key things he
41:30 introduced was he found it thousands of
41:34 banks thousands of new banks local banks
41:36 small banks regional banks specialized
41:40 banks all across China and the rest is
41:43 history that's how you get high economic
41:44 growth “
https://www.youtube.com/watch?time_continue=1&v=OdYmdKUiQNw&feature=emb_logo

[ltr]

BTW who would be a Chinese equivalent of Jeremy Corbyn?

[ I can easily understand being a Tory, but failing to understand and value in any event just how exceptional a political representative or leader Jeremy Corbyn has been is saddening indeed.

As to the question, that is of course absurd. ]

[derangedlemur]

Didn't you discuss or link a paper recently showing that fund managers were actually quite good at spotting winners, but that they were so crap at choosing what/when to sell to fund their picks that they lost overall?

[aragon]

Loosing Deepmind (London based AI company AI) to Google (Alphabet, could be seen as careless.

https://www.businessinsider.com/dfinity-founder-dominic-williams-criticizes-deepmind-sale-to-google-2019-7?r=US&IR=T&op=1

"The scientist who's built a $2 billion nonprofit to end big tech's monopoly says DeepMind’s sale to Google was 'an outrage’"

https://en.wikipedia.org/wiki/Google_DeepMind

or was that a previous incarnation of the Tory party (2014).

But to loose ARM to Softbank (2016) under Boris, a company who looked to milk it, was under Boris looks like indifference.

https://asia.nikkei.com/Business/China-tech/How-SoftBank-s-sale-of-Arm-China-sowed-the-seeds-of-discord

"Since last Wednesday, Arm -- which since 2016 has been owned by Japan's SoftBank group -- and Arm China have been locked in a bitter clash over the appointment of the chairman and CEO of the Chinese unit."

"Such a spat would be embarrassing at any time -- but when the tech world is being shaken by the growing tensions between the U.S. and China, it fuels debate about how successfully Arm can steer between conflicting demands."

Now the sale of ARM to Nvidia almost looks like enemy action, to miss quote Al Capone.

As according to a co-founder a sale to Nvidia could destroy ARM:

https://tech.newstatesman.com/business/arm-co-founder-nvidia-sale-is-because-softbank-over-invested-in-firm

"Brown says Nvidia or any other semiconductor company owning Arm is “immediately going to upset that balance and make it very, very difficult for other companies to feel that they have equal access to the technology”."

"Shadow minister for digital, science and technology Chi Onwurah said in a statement to NS Tech: “It is vital the UK maintains capability in key strategic areas, and Cambridge-based ARM Holdings is a major technology and telecommunications asset."

The Tories have decades of form (Thatcher) for 'Outsourcing R us', BT switched from UK/US Plessey/Ericson firms to Huawei and becoming an empty shell.

There's always RISC-V and it's open source.

https://genius.com/Architects-castles-in-the-air-lyrics

"I wasted time building castles in the air
If there's peace to be found, I won't find it there
My fear still sees when my eyes are closed
But the blame's on me, this is the path I chose"

[aragon]

I intended to include this about ARM
https://www.bbc.com/news/technology-53637463

And RISC-V
https://en.wikipedia.org/wiki/RISC-V

As an alternative if NVIDIA takes over ARM.

NVIDIA sale:
https://www.pcworld.com/article/3574961/nvidia-will-buy-arm-for-up-to-40-billion-combining-smartphone-gpu-powerhouses.html

“AI is the most powerful technology force of our time and has launched a new wave of computing,” said Jensen Huang, founder and chief executive of Nvidia, in a statement. “In the years ahead, trillions of computers running AI will create a new internet-of-things that is thousands of times larger than today’s internet-of-people. Our combination will create a company fabulously positioned for the age of AI.”

[Hugo Evans]

Hayek's theory doesn't really help us. In the world we actually live in firms make investment decisions based on break even horizons and hurdle rates that are largely discount rate (price) insensitive. That is the norm is circa 12-15% return on capital giving you a break even at around 5 years. That's a corporate cultural norm that's has entrenched itself over the last few decades, and has had the effect of lowering UK fixed capital investment to the lowest in the OECD for two decades, and put us in the bottom quartile for the two decades before that. Instead we have seen 'investment' for rentirisation on a huge scale, i.e levaraged buyouts of rent yielding assets (privatisation) which are then sweated, with the profit washed offshore. That process was also a form of 'state aid' but of course we don't think of it that way. Similarly we don't think of discount window policy by the CB, or asset purchase programs as state aid , but they are defacto just that. The form of state aid that the EU forbids, thanks in no small part to the UKs involvement in creating the EU rules, is about finding ways to guarantee profits from productive investments and getting the break even horizons further out, so big meaning game changing projects come back on the table. Again we were doing that through PFI, but don't call it state aid as the control / ownership frontier can be constructed on the private side of the book.

As we don't actually know what the industrial policy of this government is, we don't really know why it wishes to regain state aid powers. But if someone got into power who actually wanted to reverse the de-development of the UK into a banana republic, then they will absolutely need those powers, Hayek or no Hayek.

[Blissex]

«the de-development of the UK into a banana republic»

More appositely an operetta kingdom. Instead of "Great Britain" I propose as its name either "Boris Island" or "Greater Monaco".

[aragon]

Blissex: They have already decide on Singapore on Thames

https://www.quora.com/What-is-the-meaning-of-Singapore-on-Thames?share=1

The Westwing S05E19 - Talking Points

30:08 Where Josh realizes he has outsourced the new economy jobs to India (until 30:50)

It goes on to address concentration of corporate media.

Of course the repeal of Glass-Stegal and the Big Bang issued the coup de grace to the real economy.

[Phoenix44]

"The problem is that Hayek thought market prices reflected all information so government just has to fund the companies with the highest stock price. Of course that is ridiculous because price, as any trader will tell you, is a liar. Hayek was wrong."

Pretty much all of that is utter bunkum and shows a complete misunderstanding of Hayek, stock prices and government actions. As for traders, anybody who trades believes prices are wrong. Sadly for traders, none of them has ever been proven right, and prices always win in the end.

[Phoenix44]

"More appositely an operetta kingdom. Instead of "Great Britain" I propose as its name either "Boris Island" or "Greater Monaco"."

You post a lot but know nothing. Apparently you take your information from the Student Union's Guide to why Labour is Right. If you honestly think governments can pick a successful sector, you really live in an evidence-free fantasy.

[robert mitchell]

Hayek believed knowledge was efficiently encoded in price signals, so governments simply have to buy the best-performing stock to choose the winners that prices have already selected.

"prices always win in the end."

You mean like Covered Interest Parity has been violated for over a decade, with all the derivative fair pricing formulas based on them rendered arbitrary as a result?

How long does "in the end" stretch out for? After you're dead and we can't call you on it anymore?

[ltr]

https://www.independent.co.uk/news/uk/politics/coronavirus-grouse-shooting-hunting-new-rule-six-b436707.html

September 14, 2020

Government exempts grouse shooting and hunting from new coronavirus gathering ban
Tory MPs angry about mis-step
By Jon Stone

[ Imagine having such a shameful government. I know though, the problem was Jeremy Corbyn. ]

[ltr]

September 14, 2020

Coronavirus

UK

Cases   ( 371,125)
Deaths   ( 41,637)

France

Cases   ( 387,252)
Deaths   ( 30,950)

Notice the ratios of deaths to coronavirus cases are 11.2% and 8.0% for the United Kingdom and France respectively.

[Blissex]

«If you honestly think governments can pick a successful sector, you really live in an evidence-free fantasy.»

Well, that has happened lots of times, from picking winners to creating winners: for an example of the latter consider the fantastic amounts of taxpayer funds (Treasury, BoE) and other policies (Help to Buy, "light touch" regulation) used by the tory governments of the past 40 years to make sure that "national champion" sectors like finance and property kept being big winners, And not just sectors, individual corporations too: the Conservatives have covered over 10 years well over £100 billions of losses by the NatWest/RBS group alone. Picking sectors as winners has also been massively endorsed by "The Economist", the liberist magazine itself, when in an editorial they wrote about the necessity of bailing out the finance sector:

“Britain will one day wake up to discover that it has lost one of the world's most successful business clusters, and the best hope the next generation has of earning a decent living”

Do the City and "The Economist", not to say the BoE and the New Labour and Conservative parties live in a world of evidence-free fantasy? Should have they let most of the UK finance sector be liquidated?

Indeed figuring out which sectors are winners is quite easy: look at which sectors are already recently successful in other countries and are most compatible with local advantage like cheap capital or cheap labour or location. The whole Germany/Japan and then Singapore/south-Korea/PRC industrial development strategy has worked pretty well on that basis (without usually picking individual corporate winners).

[Blissex]

«Hayek believed knowledge was efficiently encoded in price signals, so governments simply have to buy the best-performing stock to choose the winners that prices have already selected.»

I think that is a mixup of extreme neoclassical and hayeakian positions, where instead the hayekian position was rather more nuanced.

I think that his argument was that the distributed "wisdom of crowds" *usually* resulted in prices that were *better* estimates than those of any individual, not that they were always efficient or most efficient. Just better, usually, under assumptions of fairly high competition on both the sell and buy side, and no common mode of failure (which he did not state IIRC, but implied). That is that the aggregation of many different opinions is usually a better estimator than any single opinion, however well considered.«Hayek believed knowledge was efficiently encoded in price signals, so governments simply have to buy the best-performing stock to choose the winners that prices have already selected.»

I think that is a mixup of extreme neoclassical and hayeakian positions, where instead the hayekian position was rather more nuanced.

I think that his argument was that the distributed "wisdom of crowds" *usually* resulted in prices that were *better* estimates than those of any individual, not that they were always efficient or most efficient. Just better, usually, under assumptions of fairly high competition on both the sell and buy side, and no common mode of failure (which he did not state IIRC, but implied). That is that the aggregation of many different opinions is usually a better estimator than any single opinion, however well considered.
It is difficult to disagree with that, and its "flaw" is that it is a fairly anti-capitalist message, as even business schools teach that most markets eventually reduce to just 2-3 dominant and colluding suppliers under capitalism.
It is difficult to disagree with that, and its "flaw" is that it is a fairly anti-capitalist message, as even business schools teach that most markets eventually reduce to just 2-3 dominant and colluding suppliers under capitalism.

[ltr]

«If you honestly think governments can pick a successful sector, you really live in an evidence-free fantasy.»

These folks are perverse. Try, like, taking a high-speed train ride in China, just to begin with.

[James Charles]

"If you honestly think governments can pick a successful sector, you really live in an evidence-free fantasy."

Leaving 'it' to the private sector has led to the production of such negative externalities that will probably lead to a 'potentially irreversible threat to human societies and the planet'.

[a_dude]

The Joe Studwell book 'How Asia Works' covers this in some detail. The successful Asian countries encourage exports, force their companies to compete in the global economy, the best survive and are allowed to prosper.

I am deeply worried about the UK. It could have been a force in technology. I struggle to understand how it has let so many key technical innovations be acquired by US companies cheaply at an early stage. The UK developed the best IoT/embedded/datacenter computing technologies (ARM), the best AI (DeepMind) and the best biotech (Solexa/Illumina) and flogged them all off so that the big money is made by foreign acquirers.
We will never have an NVidia or an Apple. There is no vision or ambition. Short term thinking dominates.

And where are the successful UK finance companies? Despite $$$ galore and massive government backing, the UK banks are in the toilet.

[r s mitchell]

Blissex said: "It is difficult to disagree with that, and its "flaw" is that it is a fairly anti-capitalist message, as even business schools teach that most markets eventually reduce to just 2-3 dominant and colluding suppliers under capitalism."

Then Hayek was wrong about the real world, and trying to use tangential quotes of his to passive-aggressively needle conservatives is merely pedantic.

Fischer Black thought that prices are efficient to within an arbitrary factor of two, 90% of the time. I'd go with a factor of ten, but Black's more conservative estimate still allows inflation of hundreds of percent due to noise and thus destroys orthodox inflation models ...