A common rejoinder to the program of laissez-faire is that market failures require government intervention. Just what does market failure mean, and how can such claims for or against it be evaluated? Many writers who see market failure everywhere have a misplace faith in government, and have themselves failed to come to terms with the implications of the subjective theory of value. FULL ARTICLE
Source link: http://archive.mises.org/3553/what-are-you-calling-failure/
What are you calling failure?
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I encounter this argument most often in discussing health care or legal services. Somehow, the market is not equipped, so the argument goes, to dispense these services. To the extent that this is true, it can, IMO, be traced to earlier interference in the market such as arcane licensing requirments, other limits on entry to the market by practicioners, onerous regulation, etc. The market fails because it is not permitted to function in the first place, and then this becomes the rationale for further interference.
***Secondly, and more importantly, one must fully come to grips with the doctrine of subjective value. There is no general case to be made for preferring a certain quantity of one good over another. For the stock of vaccines to be higher, some other good must be sacrificed. Every government program imposes costs on some and benefits on others. One must, in the end, make a moral argument that supports the rectitude of imposing such costs on some for the benefit of the others.***
I find this to be the most difficult of all hurdles and that the others are really just subsidiaries to this. As long as there are enough people within the governed mass who buy into the concepts of a few, objective values toward which all people should adhere, instead of a finite and several systems of value innate in each individual, and that a wide berth should be allowed within public policy setting, we will continue to drive endlessly toward Statism.
People will largely ignore ‘failures’ and the established coercive forms will never be reexamined because of the superstitious fog the masses exist in that birthed them in the first place. The desire for universality in value systems is the key and the concept that needs to be destroyed. But how can one spread this message when stacked up against the collectivists who control education, government, and the media? I wonder if blogs can really have an effect, or is it just tilting with windmills?
One of the difficulties in arguing with someone who believes in *intervention* is that they are convinced that there will be someone who cannot afford a service they themselves believe is necessary. As Vache points out, legal and medical services are very common, so is “roads”.
But what is astounding is that food is not used. What could be more important, more vital than food? Yet these same people who believe in, for instance, universal health care, don’t advocate centralized food production/distribution.
They don’t see the market failing with food, toilet paper, green peppers, etc. They have never put the astounding success of the relatively “free” market in food together with their angst of “free” market failures.
This makes it far more difficult to convince someone of the vitality they’re missing in the market, who is already convinced that the free market will have failures, because it is on the level of religion. It is something they take on faith, and as anyone who has tried to argue with a zealot knows, the zealot is unshakable in their faith.
Why go as far as food? My response to people that argue for universal health care is to ask whether they really think everybody should also drive a Cadillac, and are they willing to provide it? Noting, of course, that there are those of us that would prefer some other model, and there are those that won’t have a car at all in a free market.
I am more concerned with the concept of externalities. While I buy the argument that once you have a state, you have changed the entire system, I believe that in fact there are situations where individuals are able to impose costs on others – the classic case being air pollution (or pick another example if you don’t like this one). While the usual response is that the most efficient way to deal with externalities is to internalize them by creating a market, how can that be accomplished without a “state” or other coercive authority?
Great article, though I wonder if it couldn’t be stated a little more simply. Dealing with the meaning of “market failure” is good, and the corollary is why should anybody assume that the government can do a better job than the market? And Laura, this question also applies to externalities: why should we assume that government is better able to deal with externalities than the market? Besides the increased possibilities for political corruption and abuse, there’s also the question of the unintended consequences of coercion.
Unfortunately, many people are “pragmatic” and want empirical evidence, but even if you’re a walking encyclopedia, it’s not that easy to find apples-to-apples examples.
Laura, you have a very valid point. How to punish a polluter without a state to do it?
It’s not that air pollution is a given, after all technology marches on and having a soot-spewing smoke stack is an anachronism. Yet I can have a smoky fire in my fireplace and my neighbors don’t prosecute me because we have shared values. A “community value” that polluting other peoples air with a home fireplace is OK.
Does that mean that “we” therefore have a government? No, it means we agree. And if someone in the neighborhood did put a soot-belching smokestack next to their house, “we” would object not because it was illegal, but because it was pollution beyond what “we” consider OK.
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