… is from page 352 of my GMU Econ colleague Larry White’s new and superb book, The Clash of Economic Ideas:
Unless government has a technique for solving the demand revelation problem that private entrepreneurs cannot adopt, [Paul] Samuelson and [William] Nordhaus’s statement that “because private provision of public goods will generally be insufficient, government must step in” is a non sequitur. Lacking a way to elicit the necessary information about willingness to pay, we lack assurance that government stepping in will move us closer to economic efficiency….
Whenever private provision of a good is presumed inefficient because of a demand revelation problem, government provision should also be presumed inefficient. We should expect the same goods that exhibit market failure ipso facto to exhibit government failure to achieve Pareto efficiency.
