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I am very sympathetic to ideas which promote more choice in government. In other words, can we get some version of the feedback and competitive mechanisms which work so well in markets to operate in government. Of course there are many. But I think those proposals suffer from a problem that government in general faces. How do we deal with “market failures” regarding political choices?

For example, in a world of virtual government, one could argue that there are information asymmetries or shortages of easily usable information, and the classical “textbook” correction for such failures is to have the government step in to correct them. But if we are talking about choice between government entities or representatives, who then is empowered to make the market failure correction?

Or to put it in today’s world – how come the “progressives” are on a religious crusade to look for (and justify intervention on behalf of) market failures, but refuse to recognize the very same mechanism operating within government. For example, couldn’t one make the same argument that is used against markets against local governments? Local governments seek only their own interest, and therefore do not have the national interest in mind. Thus we very likely get oversupplies of certain local public goods and undersupplies of others. The existence of such externalities is without question. There are way too many schools in small, rural school districts. There are way too many fire stations in some areas. And so on. Whether federal policy is aimed at handling these is entirely an empirical question. But even if it is, I rarely (ever?) have seen an argument looking at the decisions political agencies make and apply the same rules of supply, demand, information, externalities, monopoly, etc. to them.

So, why do we not see more attention paid to this possibility? And dear readers, might you suggest what some “market failures” are out there in government that might be useful to examine? The one that immediately comes to mind is the US National Defense program. You can easily make a case that the world free rides on it, and therefore some world body should exist to tax the non-US countries to provide for more of it. You can also easily make the case that the world experiences (net) adverse costs from it, so a world body should tax the US government for its defense expenditures. How would the statists react to this? My sense is that they would love it – isn’t a new world order part of the progressive utopia?

One Response to “Choice in Government, a Practical Problem”

  1. Harry says:

    Smaller is better, wintercow.

    A liberal acquaintance wants to consolidate Pennsylvania municipalities, so we can get the benefits of unionized police forces and all the rest of the efficiencies that his sorry municipality enjoys or suffers from.

    We in the boondocks are lucky to have skilled volunteer fire companies supported by people like me, and supported more by volunteers, brave men and women. Without their daily sacrifice for their neighbors, it is hard to imagine what our relatively poor community would have to pay for a fire company.

    I have to confess my ignorance over the term, “market failures,” wintercow. You have used the expression often, so I assume it is legitimately important, although the concept is distant to me. I know that socialists and marxists and liberals have no faith in free markets, but seriously, what do you regard as a market failure?

    When I buy my wife a cashmere sweater at Macy’s and do not use the coupon to get 30 percent off, plus the other coupon for an additional fifteen percent off, is that a market failure? How different is that from any other free transaction, including whatever Calpers decided when they bought Fannie Mae stock and their debentures?

    So when we all talk of the failure of the market and of the imperfection of the quintillions times ten that occur each hour of the day, let us think of the wisdom of Chris Dodd, Barney Frank, and the Princeton economics department.

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