… is from page 87 of the May 9th, 2020, draft of the important forthcoming monograph from Deirdre McCloskey and Alberto Mingardi, The Illiberal and Anti-Entrepreneurial State of Mariana Mazzucato (original emphasis):
But the State is not akin to a private company. It is from a very different kinship system, that of coercion rather than persuasion. It does not start a software company in a garage, like Bill Gates. It does not go out of business if its investors quit or if its customers do not turn up at the shop. The State’s shops in Cuba are mostly empty of product, but they remain open. The State can always tax, or inflate, or nudge, or imprison, so that the whole of the population is, like it or not, its investors and its customers.
DBx: Mariana Mazzucato would have her readers believe that the state losing money on a failed business venture is akin to Mr. Smith losing money on a failed business venture. After all, what both situations share is “failure.” But as Deirdre and Alberto note, what’s relevant is what the latter situation does not share with the former. In the latter situation Mr. Smith loses only his own money (or that of people who voluntarily entrust their own money to Smith). In the former situation, the state loses other people’s money; the state loses – more precisely, state officials lose – the money of people who never agreed to entrust their money to the state and its officials.
Forget the obviously much-worse incentives that exist when some people get to “invest” money coercively extracted from others compared to when people invest only their own money. Instead consider the simple ethics of the matter. It’s stunning and sad that Mazzucato sees Sam seizing money from Sue and Steve in order to “invest” it as being no different than Bill persuading Betty and Bianca to entrust their money to him for his proposed entrepreneurial venture.
By Dr. Mazzucato’s lights, if a thief steals Joe’s money and uses it to throw a party that no one attends, the situation differs in no meaningful way from that in which Joe spends only his own money to throw a party that no one attends. ‘Hey,’ Dr. Mazzucato seems to say, ‘because some private people throw parties that, on some occasions, no one attends, there’s then no good reason to criticize government officials who seize other-people’s money and use it to throw parties that, on some occasions, no one attends.’
Ethically, the problem is not with throwing parties that no one attends. Ethically, the problem is with throwing parties with money that neither belongs to the party-thrower nor was entrusted to the party-thrower by others voluntarily. Even if parties thrown with money seized from other people turn out generally to be better – that is, more well-attended – than parties thrown privately, throwing parties on other people’s dimes remains unethical. Decent and civilized people refuse to do or endorse such things.
And the ethics of the matter don’t change one bit if those who throw parties with money seized from others hold government offices.