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Quotation of the Day…

… is from page 41 of Deirdre Nansen McCloskey’s hot-off-the-press 2022 volume, Beyond Positivism, Behaviorism, and Neoinstitutionalism in Economics:

What is bizarre about the history of [market-]imperfection finding – and, from the left, the proposed statist corrections – I have said, is that never does the economic thinker feel it necessary to offer evidence that this or that proposed intervention by the state will work as it is supposed to.

DBx: People unfamiliar with professional economic literature might suppose that McCloskey here exaggerates. But she doesn’t. For more than 100 years – and especially since the 1930s – it has been considered by most economists to be a perfectly acceptable scientific move to identify and describe on chalk boards possible ways that markets might fail to achieve perfection, then to label these failures as “market failures,” and finally to conclude that the state should be charged with the responsibility of ‘correcting’ these imperfections. As McCloskey suggests, it’s a wholly unscientific move to assume – simply to assume – that government officials have the motivation, information, and power of omnibenevolent, omniscient, and omnipotent gods.

McCloskey in addition – in the book quoted above, as well as in many other of her works – correctly notes that the economists who identify these theoretically possible “failures” and “market imperfections” almost never attempt to quantify their real-world significance. Were such measurements reasonably carried out, the results in all cases would almost surely be swamped – magnificently swamped – by the the size and significance of market successes.

One of my dearest friends, who I’ve known since I was in my early 20s, has had (and still has) a splendid life and career. Yet this friend is often disgruntled. “Friend!” I say to him, “Your glass is 98 percent full, and yet you obsess over the unfilled two percent. Stop!” I say the same to my fellow economists – and fellow human beings – who obsess over market failures and imperfections.