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In the current issue of Barron’s I review Jeff Madrick’s latest book, Seven Bad Ideas. (My review is the last of the three reviews at this link.) [2] A slice (links added):
Unlike Madrick, however, Austrians [3] also understand that this imperfect competitive market process still outperforms all other methods of directing economic activity. The author naively thinks that to locate a market imperfection is to identify a sure opportunity for successful government intervention.
Government officials spend other people’s money. So they are less driven than are consumers, entrepreneurs, and investors to spend money prudently. Government officials also specialize in getting elected — a specialization that rewards a talent that is quite different from what is required to run a business or to direct investment funds to their most productive uses. Profound appreciation of this political reality springs from yet another non-mainstream school of economics that the author ignores: public choice [4], which uses economics to investigate the actual — as opposed to the hoped for — workings of the public sector.
It’s unsurprising that Madrick seems unaware of Austrian and public-choice economics. His goal is less to explore problems with economic scholarship than to make a case for aggressive government interventions. His discussion of economics is but a springboard for asserting that markets generally fail when they are not tightly within the grip of the visible hand of the state. Public-choice theory has been dubbed “politics without romance.” Madrick subscribes to politics with romance.