Fri, 12 Mar 2004

Bad Economist, No Donut

Eli Noam embarrasses himself with an egregiously wrong-headed analysis of Market failure in the media sector. One thing that you must, must know, is that any economist who talks about "market failure" needs to put his feet on his shoulders and push. Markets do not fail any more than gravity fails. What would you think of a physicist who talked about "gravity failure"? Probably not much. You should think as little of an economist who talks about market failure.

Now, you can certainly claim that a broken egg is due to gravity failure. That's not science, however. That's a misdirection; applying fault to something which is clearly not culpable. In terms of fault, the person who dropped the egg is much more likely to be guilty. Furthermore, it's assigned a negative quality, when in fact the egg may be broken because it was dropped into a mixing bowl.

The real kicker, however, can be seen by reading farther down in Noam's article. You can see that his prescription for "market failure" is government interference. That points to the cause of his claims that markets have failed. Once markets have failed, no sensible person could possibly object to government picking up the pieces, could they? Well, I think I'm sensible, and I object!

Now, I would be the last person to claim that markets always produce good results. Some problems are hard for markets to solve simply because they are hard problems. Pointing to a problem which is hard for markets to solve doesn't automatically mean that solution-by-government will be better. It may turn out to be that government interference will produce a better result (pareto optimal) than peaceful cooperation. I allow that as a possibility at the same time that I doubt it will ever happen, once all costs are accounted for.

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