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Quotation of the Day…

… is from page 70 of Ronald Coase‘s insightful 1972 article “Industrial Organization: A Proposal for Research” (as reprinted in Coase’s 1988 collection, The Firm, the Market, and the Law) (original emphasis):

I should now like to return to the undertaking of economic activities by organizations other than firms and, particularly, by governmental organizations.  Somewhat surprisingly, this is not a subject with which economists have been much concerned.  Insofar as they have considered this topic, it was as part of a discussion of what the government ought to do, whether by taxation, regulation, or operation, to improve the working of the economic system; of these three policies, the least attention has been given to government operation.  First, no serious investigation was made of how the policies advocated would work out in practice.  To justify government action it was enough to show that the “market” – or perhaps more accurately, private enterprise – failed to achieve the optimum.  That the results of the government action proposed might also fall short of the optimum was little explored, and in consequence the conclusions reached have little value for appraising public policy.

DBx: It would be nice to be able truthfully to say that matters are much-improved since Coase wrote the above words 46 years ago.  But no such thing can be said.  For example, there was precious little such serious analysis of the sort that Coase here calls for among mainstream economists when the Consumer Financial Protection Bureau (CFPB) was created in the wake of the most-recent financial crisis.

With few exceptions, the typical economist (very much like the typical “Progressive” of whatever occupation) leaps far too blithely from a suspicion (often baseless) that the market is ‘failing’ in some instance to the conclusion that government should – because it is assumed that government will expertly, apolitically, and with adequate knowledge of all the relevant details – intervene successfully to ‘correct’ the ‘failure.’

Among too many people, state-faith is unshakable.