Gavin Newsom Struggles to Understand the Economic Calculation Problem

Outside of his willingness to defy state law to defend gay couples' right to marry while he was San Francisco's mayor, we've never thought much of Lt. Governor Gavin Newsom. In general, he strikes us as little more than another vapid empty suit holding elective office. Since taking up his current gig in Sacramento, Newsom hasn't done much apart from a fact-finding trip to Texas, where he tried to discover why the Lone Star state is a destination for employers fleeing California. But that may be about to change: as the San Francisco Chronicle reports, Newsom recently gave a speech at the Public Policy Institute of California where he began to lay out plans for improving our state's economy.

Unfortunately, they're exactly what you'd expect a tool of the California Democratic Party to propose. He wants to establish a "China California" office overseas, as part of a stronger focus on manufacturing and export goods. He wants to coordinate with the state's universities on "workforce development and alignment". And he wants to further the development of "regional clusters", whatever that might mean. He's of course opposed to higher education cuts, and is also ambivalent about Jerry Brown's proposals to wipe out redevelopment agencies and enterprise zones.

If Newsom were familiar with Ludwig von Mises's work on economic calculation and central planning, or if he were familiar with the history of government planning in Eastern Europe's Communist countries, he might have drawn the right lesson from his visit to Texas. According to the Chronicle, he was struck by Texas' "focused strategy" for economic development. To Newsom, that apparently suggests the need for a different type of top-down management of the state's economy from Sacramento. It doesn't occur to him that the getting the hell out of the way of economic progress might be the best thing Sacramento could do at this point. Nor does it occur to him that the free market would almost certainly do a better job than his proposed "jobs czar" of developing "regional clusters" and determining the best uses of economic resources in the state.