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Quotation of the Day…

… is from page 113 of my late Nobel laureate colleague Jim Buchanan’s 1983 article “The Achievement and the Limits of Public Choice in Diagnosing Government Failure and in Offering Bases for Constructive Reform,” as this article is reprinted in James M. Buchanan, Politics as Public Choice (2000), which is volume 13 of the Collected Works of James M. Buchanan; those who are unfamiliar with, or who reject, the public-choice perspective invariably compare real-world – and, hence, imperfect – market outcomes with imagined ideal government-generated outcomes; such comparisons always find real-world markets to be inferior to idealized, imaginary government ‘solutions’; Buchanan and other public-choice scholars worked to correct this bias in the analyses of policies, a bias that runs throughout much of modern welfare economics:

By implication almost universally, and by explicit statement in many instances, these “market failure” demonstrations of theoretical welfare economics were held to offer a prima facie case for corrective measures implemented through political-governmental means. There was no consideration given to the institutional structure within which such idealized corrective measures were to take place. To the theoretical welfare economists, markets “failed” in the allocative process; “ideal” government was assumed to be the alternative.

On several occasions I have referred to Public Choice, inclusively defined and as developed largely in the 1960s and 1970s, as “a theory of government failure” that offsets the “theory of market failure” that emerged from theoretical welfare economics. Just as the latter contains demonstrations that observed market processes fail to produce results that satisfy the conditions for allocative efficiency, Public Choice theory (once labeled as “welfare politics” by Paul Samuelson) contains demonstrations that observed political-governmental processes fail to satisfy the requirements for efficiency in the implementation of corrective measures.

DBx: And yet mainstream economists – who continue to accuse Austrian/Virginia/UCLA economists of being unscientific for failing to see market failures in all the many places in which mainstream economists see (or think that they see) such failures – routinely ignore what public-choice economics exposes as the likelihood of government failure.

Nothing about such a stance is scientific. Quite the opposite.