When should the government intervene?

When should the government intervene?In an introductory economics class, we will introduce: market failure. We will discuss these in more detail in our intermediate economics classes. Advanced and field courses detail the many ways in which pure exchange alone doesn’t get the job done, and how, in theory, governments could make things better.

In theory. Most textbooks make assumptions about government, its capabilities, and its motives. A perfectly benevolent, omnipotent, omniscient government would set a tax equal to the marginal external cost if it observed an externality. This is a rather heroic assumption, and it is important not to mistake the model for reality and the assumption for a plausible explanation of the world as it is.

To this end, a presentation by philosopher Jason Brennan served as inspiration for the paper. Contributing to the symposium. Private Enterprise Journal Concerning the donation of my late friend and Freedom Fund donor. Stephen G. Horwitz. Brennan and co-author Christopher Fryman explained that all the arguments for regulating consumer choice apply equally to political choice. Indeed, we are irrational and weak-willed in the supermarket. The problem is even worse at the voting booth because our incentives are even worse.

Therefore, Brennan and Fryman explain, there are several conditions that must be met before the government can override people’s choices. I’ll summarize them here. First, we need to ask whether the problem we want the government to solve is an unintended consequence of another government policy. Are you worried about the environment or lack of urban density? See how government policies are discouraging urbanization and densification (for example, zoning for single-family homes).

Second, the private sector has already solved many market failures. Are you worried? externality Is there second-hand smoke in restaurants and bars? It’s already reflected in wages and prices – and One unintended consequence of banning smoking in cities was that people drove to the suburbs to drink.He then killed people driving home.

Third, it is not always clear which government we support. actually has been run by our people actually Select those who will face incentives actually The face makes things better. Affordable housing could be solved tomorrow if we abolish it rent management And layers of red tape are hindering new construction. Telling people that you support policies that lower property values ​​or challenge their most cherished beliefs is a very nifty way to make sure you’re understood. is. please don’t Re-elected.

Fourth and fifth, it is our duty to ask whether the policy passes a cost-benefit analysis and how it changes people’s incentives. The Transportation Security Administration, for example, is a tremendous waste of resources that far exceeds the cost per human life saved by other policies and initiatives. The TSA also made flying less convenient and induced increased driving, which meant more fatal highway crashes.

Finally, even if a policy passes all these tests, people may still have rights over the proposed policy. parable Eugenic forced sterilization policy If you pass all the other tests, which you almost certainly won’t, you will be disqualified because it violates people’s bodily autonomy.

How do we decide when and where to intervene? As Steven Horwitz and I discussed a long time agomarket failure is a necessary but not sufficient condition. Before trying to cure various diseases, it is necessary to make sure that the treatment is not worse than the disease.