MARKET FAILURE VS. GOVERNMENT FAILURE: We’ve certainly seen a lot of the latter, lately. If “market failure” is an excuse for taking power away from markets, shouldn’t “government failure” be a reason to take power away from government?
MARKET FAILURE VS. GOVERNMENT FAILURE: We’ve certainly seen a lot of the latter, lately. If “market failure” is an excuse for taking power away from markets, shouldn’t “government failure” be a reason to take power away from government?
1 comment:
Depends. If you're using the economics definition of market failure, government intervention is always preferable to allowing the market to run itself. However, there are only four cases where this is true: services providing external benefits (roads, fire, police, military}, or external costs (pollution)goods with huge economies of scale (electrical)or regulation of markets that aren't competitive. Taking power away from the government is similarly always preferable in every other case. Government is always less efficient; but, in the case of true market failure, it provide a better outcome even with its inefficiency. On the other hand, if you mean an industry that has failed like the American auto industry, due to it's inability to produce a good product. . .government should let them fail. They will row back. Government does a lot of things badly, but the things it does well almost always fall into one of those categories. SMUD in Sacramento, as compared to PG&E, is a prime example.
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