"government failure"

[Jim Devine <jdevine@xxxxxxxxxxxxxxx>]

Brad wrote:
> > Makes me think we need much better theories of government failure than we
> > have...

I didn't say it clearly enough in my previous response to this statement,
but this sentence embodies an inadequate problematic for dealing with this
issue.

Originally, orthodox economists of the more "liberal" or
statist-technocratic perspective pointed to the failure of markets (e.g.,
pollution) as requiring government intervention. They won, but then those
of a more "conservative" (laissez-faire) perspective, such as James
Buchanan, highlighted the concept of "government failure" (e.g.,
rent-seeking).

The problem with both of these is that "failure" is defined relative to a
totally utopian situation, portrayed for example in Gerard Debreu's
mathematical novel, THE THEORY OF VALUE. (It won him the Nobel Prize in
Literature, if I recall correctly.) The Walrasian market Eden is used as a
benchmark for all comparisons, so that "failure" arises because the world
doesn't fit Debreu's assumptions. On the ideological level, the neo-liberal
(a.k.a., laissez-faire) impulse is to force the world to fit these
assumptions. Some of the more "liberal" or statist-technocratic types try
to moderate this impulse, as noted in Brad's long missive defending his
neo-liberal predilections.

To my mind, the orthodox definition of market or government "failure"
should be rejected by serious scholars (though I teach it to my students).
In my previous missive on the above quote, I defined "success" in terms of
what's good for those with the power. What orthodox economists may see as
"failure" is success to the capitalists or the Stalinist bureaucrats.
However, we should keep in mind what "success" is from the point of the
working classes. There is a small overlap with what's success from the
ruling-class point of view (as with Stalinist investment in health and
education) but there are also fundamental conflicts. There are two
fundamentally distinct definitions of the "collective good."

Jim Devine jdevine@xxxxxxxxxxxxxxx &
http://clawww.lmu.edu/Faculty/JDevine/JDevine.html