• Government failure, market failure … blog failure

    I’ve been alerted to the fact that some people don’t think I’ve written enough about government failure. Others, perhaps, think I haven’t written enough about market failure. Likely if you think one way or another you haven’t read enough of my posts or other work. It’s all here.

    I’d say, on the whole, I’ve been harder on government than markets. That’s because it is, in part, my job (or has been when so funded) to consider government policy and point out how it can be improved. Sometimes I find and believe that market signals can be harnessed to enhance efficiency (Medicare competitive bidding). In other cases, I’ve been convinced that government can beneficially play a larger role (Mark Pauly’s idea to remove adverse selection from the insurance market, or largely so).

    Look, not every 500-1,000 word blog post can include your preferred view of markets or government. Some will seem to lean one way or another. Trust me, you don’t want to read  a blog post that hems and haws and tries to balance everything. It’d be too long, and you wouldn’t learn much. Think I’ve been too hard on markets or government? Just wait. I’m an equal opportunity critic.

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    • Austin,

      John Goodman at the NCPA discusses your post on market failure and government failure saying… “the vast majority of people in health policy do not understand the concept of government failure.”

      “Whereas in economics, market failure is considered an exception to the norm, in politics, government failure is the norm. In general, there is no model of political decision making that can reliably produce ideal outcomes.

    • Government failure is easy to point out, at least where I live. Markets fail too, but market failures are much easier to correct than your average government program.

      The Goodman blog post (mentioned above by Devon Herrick) is good too. You two should go on the road together.

    • In response to government failure in the 70’s and the 80’s Osborne and Gaebler wrote Reinventing Government as a call to impose market type forces in public sector to increase efficiency. This sparked the National Performance Review in 1992 by the Clinton Administration to make government more efficient. Aside from the debate on the role of government in health care, what is the implicit consequences to the marginal costs of health care in market failure vs government failure? Also who is ultimately liable?

      I noticed from Mr. Herrick’s link that Goodman’s blog talks about marginal cost vs price offered by consumers and found this an intriguing idea.

    • Reading your columns from Feb 16 & 17, however, your examples of market failure don’t appear to be a failure at all. You mention public goods & externalities with respect to vaccinations against communicable diseases, but vaccination programs are effective even if there are free riders who don’t get the shots at all. Indeed, it is likely more efficient if only X percentage get the shot, rather than mandating that every last person get one. And my outlay to get a shot is effective and worthwhile, even if no one else gets one. No herd failure here.

      • @Joe Barnett – Could a large outbreak of a communicable disease that was otherwise preventable be interpreted as a market failure? Yes, if the full benefits of prevention are not internalized (accounted for) by market participants. Thus, a market that overprices prevention by ignoring the positive externality is the very definition of a market failure.

        Maybe you don’t think vaccination is a good example. But there are other candidates. I recently blogged about substance use treatment and prevention. You can object to that too, but I think we can find still others.

        The well being of individuals is tied to the well being of society in general. How could it be otherwise?

    • Don’t want an epidemic, for sure! But on the substance front, the term use suggests that you might consider some government expenditures to prevent (DEA) or treat (electroshock therapy, perhaps) drug use might be public bads rather than goods?

    • Austin,

      We stll disagree on the concept of “government failure.” The debate continues at econlog: http://econlog.econlib.org/archives/2011/02/john_goodman_on_4.html