Quotation of the Day…

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… is from page 279 of my late Nobel laureate colleague Jim Buchanan‘s 1987 paper “Market Failure and Political Failure,” as this article is reprinted in James M. Buchanan, Federalism, Liberty, and Law (2001), which is volume 18 of the Collected Works of James M. Buchanan:

The theoretical welfare economists of mid-century … assumed, implicitly, that the political alternative to the unimpeded operation of the market itself operated ideally. That is to say, it was simply presumed that “failures” in market arrangements could be ideally corrected by politically directed adjustments in the rules guiding market participants. The prospect that any feasible political corrective for market failure might also fail when compared against the ideal standard of efficiency was not examined.

DBx: Unfortunately, the typical economist today continues simply to assume that government will perform ideally, or perform at least better than the market arrangements that government replaces or modifies with its interventions. One of the ways that ECON 101, as still taught today, does indeed mislead students is that, with rare exception, public-choice considerations are ignored. I cannot now find a link to the paper (or papers) that Jim Gwartney recently wrote on the matter, but Gwartney and co-authors examined all of the leading principles-of-economics textbooks and discovered that precious few of them incorporate public-choice into their analyses. (Gwartney’s own great textbook is the most notable of the few exceptions.)

It is not science to point to real (or, often, imagined) market failures and then show with this model or that how a god-like agent from above can ‘solve’ the problem.

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