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Quotation of the Day…

… is from pages 61-62 of the 2011 revised and enlarged edition of Thomas Sowell’s 2009 book Intellectuals and Society:

[T]here are few things in politics as unmistakable in its implications as red ink on the bottom line is in business. In politics, no matter how disastrous a policy may turn out to be, if the causes of the disaster are not understood by the voting public, those officials responsible for the disaster may escape any accountability, and of course they have every incentive to deny having made mistakes, since admitting mistakes can jeopardize a whole career.

DBx: Oceans of black and blue ink have been spilt over the years by economists on describing every imaginable way in which markets might fail. While much of what is imagined has no counterpart in reality, it is nevertheless true that markets aren’t – and will never be – perfect by textbook standards. Sometimes incentives are such that Jones can impose costs on Smith without Smith’s informed consent. But this perverse incentive is minimized in private-property markets. Not only does Smith himself or herself have incentives to discover and avoid such an imposition, entrepreneur Jackson can profit if he or she discovers Smith’s predicament and devises a way for Smith to escape.

In a contrast that couldn’t be larger or more stark, this perverse incentive is baked into the nature of politics. Whatever is the true amount of market failure, and whatever are its negative consequences in reality, the amount of government failure is magnitudes greater and its consequences far, far worse.

And yet, despite this reality, very many people obsess over real or imagined market failures and press the government to ‘solve’ these. It’s akin to being horrified at a first-grade teacher who one day shows up five-minutes late for the start of the school day and then insisting that she be replaced by a thrice-convicted child molester who promises that he’ll never be late to meet his students.

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