Cato tends to be a little simplistic in their models. For example, with immigration they say it has no ill effects. Well, in the long-run I'd probably agree with them (save for the fact that natural resources are being split among more people which I think would be made up for in other ways that they cite). In the short term, it takes time for economies to adapt to changing tastes, changing spending patterns, essentially the changing makeup of the marketplace. And that does cause friction in the short term.

Likewise, as much as I defended the abolition of rent control in MA in my earlier comment, it caused a lot of short-term friction that was really chaotic. A better plan would have been to phase market rent in. Landlords had been under rent control for so long that when it was lifted, prices could double or triple. BAD! If you, however, say for the next 10 years you can raise prices by up to 15% per year and then in the 11th year you can charge whatever you want, you avoid the friction that occurs when sudden changes happen.

I'm not someone who thinks we should defend dying industries or mess with pricing a lot, but market economies don't do well with instability. Instability randomly reallocates money from some to others. For example, if you lend me money at a 20-year fixed rate of 7%, the future could randomly reallocate money between us. If interest rates drop, you get lots of money. If interest rates rise, I save a lot of money. Heck, if inflation reaches 9%, you're loosing tons of money! Random reallocation is a bad thing and stability ensures that random reallocations are kept to a minimum.

I dislike the American auto industry, but I'd like to see its death be a lot slower than those who are strictly libertarian. What do you do with a million workers? Well, plenty, but you don't do it fast. However, if the number is in the thousands of workers per year, its easier to find ways to employ them as new industries get created. Heck, even other companies might want to buy pieces of the American auto industry, but can't afford the whole thing. Honda and Toyota might see this as an opportunity to get a new plant or two. Tesla motors might be able to raise the capital in a few years to do more. But an all-at-once situation just creates friction and chaos.

Maybe Cato is right and I'm wrong, but I appreciate stability. I appreciate knowing that everything isn't coming to an end even if I'm loosing out on 5% for that stability. Discredited (as the original author claimed) is harsh, but I think economics is a little more nuanced than any pure philosophy.