Government Failure

A popular academic rationalization for having government forcibly override people's economic decisions is the theory of market failure. Advocates of the free market have long emphasized that the countless self-regarding actions individuals perform daily in the marketplace generate a larger complex spontaneous, or undesigned, order -- that is, a high degree of interpersonal coordination that is remarkably pleasing to consumers. This is the social cooperation Ludwig von Mises placed at the center of his description of the market process. Critics of the market realize this is a powerfully appealing feature of the economists' case for what these critics deride as the unfettered marketplace. So this feature has been among the prime targets of those who would straitjacket or even abolish the market. Hence the attraction of market-failure theory.

The rest of my TGIF column, "Government Failure," is at the Foundation for Economic Education website.