Bureaucracy without romance

For all those who have taken an economics course, you have undoubtedly heard a lot about it market failure. I’m guessing you’ve heard relatively less about it government failure. Part of the appeal of the public choice tradition for me has always been its very clear explanation. But in this episode, leave it to perennial favorite Mike Munger to put a wrinkle in my contemplative ease.

To begin, Munger places the earliest insights into public choice Good before the typical story (it even features Pigou!). Munger describes the history of the concept of market failure as a result of the quest to explain large fluctuations in aggregate economic activity. While economists of the time believed that letting the markets and price system work would mitigate such “failures,” they wondered whether there were interventions that could shorten this period. As host Russ Roberts puts it well: ‘Can government outperform the private sector, either by taking on some of its responsibilities or by improving the choices that would result from a private market choice, by intervening, by regulating, subsidizing and taxing? a series of private activities?”

We hope you will join us in delving into this complicated history, and we hope you will share your thoughts with us today.

1- First of all, why do YOU ​​think is laissez faire so difficult for politicians – and citizens! – to accept?

2- Why does Munger believe that? Arthur C. Pigou should be considered the first public choice theorist? To what extent did he convince you? How should we Real interpret what Pigou has to say appearances, according to Munger? As Munger says, “He [Pigou] want to to get the prices right. He has the intuition of an economist about this. He thinks democracy cannot do this.” As proof, Munger points to the Pigou quote below:

Where does Munger say most of our apparent misunderstanding about Pigou comes from? Ronald Coase? And most importantly, what does this all mean for how we should think about market failure?

3- After about 28 minutes, Munger explains the four types of market failures. What are they? Which ones are more or less subject to the vicissitudes of democracy? Which problems are likely to be solved by letting the market work, without interventions? Which countries would benefit most from government action?

4- Munger suggests that we need to design a new set of government institutions, based on expertise, that will properly guide the markets by getting prices right. As Roberts says, “Markets fail, governments fail, and that’s why we have a third thing.” Munger agrees, but says we don’t even know what the third one is yet. How satisfactory is this answer to you? To what extent can the government be sufficiently insulated from political pressure sufficient to innovate and experiment? Should we focus on making bureaucracies more effective, as Roberts suggests? What alternatives could there be? you to suggest? To explain.

5- If we need to rethink government action in the way Munger suggests, how does this change our approach? industrial policy? Munger refers to his article: “A good industrial policy is impossible‘(in a democracy), in which he writes:

…the usual separation between markets and politics, where markets are likely to outperform democracy in deciding resource allocation, was not only conceded by the Cambridge Welfare Economists: they anticipated the public choice arguments by sixty to seventy years . They just had a different solution. Their solution was to have committees of experts whose job in each sector will be to get prices right. An empirical question?

Is this an empirical question? If so, how can we start doing that? Can we find the “third way” mentioned above by breaking down government failure into institutional versus procedural failure?

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