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… is from page 357 of my late Nobel laureate colleague James Buchanan [2]’s May 1988 Public Choice paper, co-authored with Viktor Vanberg, “The Politicization of Market Failure [3],” as this paper is reprinted in James M. Buchanan, Politics as Public Choice [4] (2000), which is volume 13 of the Collected Works of James M. Buchanan [5]:
Far less often the question has been asked of what kind of “corrections” the political process can actually be expected to generate if a politicization of market failure occurs.
DBx: Any freshman student who earns a grade higher than C- in his or her introductory economics class has no trouble identifying this or that feature of reality that, not being explicitly included in economic models, can be accused either of causing “market failure” or of rendering economic theory irrelevant. Usually such accusations are invalid because those who make them don’t adequately understand economics. But even when there is something more than mere superficial validity to the charge of market failure or inapposite economics, the conclusion does not necessarily follow that ‘therefore, government intervention is warranted.’ Yet it is to this conclusion that far too many people – including C students in economics – leap.
Among the central lessons of public-choice theory [6] and research is that politics is infected with its own imperfections – and that formal (and pedestrian) analyses of political action often fail to account for the realities of political actions and interactions. Even an irrefutable ‘proof’ of some market failure in reality – or an unanswerable demonstration that economic theory fails to account adequately for this or that feature of reality – does not itself establish the case for government intervention. For what must then be asked, once this ‘proof,’ or this demonstration, has been offered, is “How will government actually operate if it is empowered to intervene?”