Reply To: Colbertism?


It seems to me that Smith is arguing that by state intervention a certain line of production may be made profitable before it becomes so naturally. But to make a line profitable before it has efficient production, the state must divert capital investment from other lines which are naturally profitable from their efficiency. Doing that must decrease the overall profits and thereby decrease the overall capital accumulation in society. There is no social advantage in having the state subsidize investment in an unprofitable line so that capital will accumulate in it making production cheaper sooner than would have happened in the market. If a line of production has the potential to become efficient by investment in that line, then investors in the market will take care to invest capital into it and into the most advantageous lines over time.