The visible hand in economics

Intervening against a strawman

Posted on: January 22, 2008

Sometimes, when you read a whole lot of polemic, you end up thinking in black and white terms. It’s nice sometimes to be reminded that ideological conflicts are not as black and white as many combatants would like to paint them. Here on this blog we like to talk about government intervention in markets. Arnold Kling reminds us that not everyone who opposes intervention is a blinkered idealist who thinks that markets are perfect:

There is an old joke about two men who discuss what they would do if they were to encounter a bear in the woods. One of the men says that he would run. The other one says, “You know, you can’t outrun a bear.”

The first man replies, “No, but I can outrun you.”

Similarly when someone says to me that “markets fail,” I say… that government intervention will tend to make matters worse.

If you want to advocate intervention in a market it is not enough to simply point out that there are market failures: you have to show that your intervention will actually improve things. Often, one market failure will create another market to solve the problem. Intervention can only be judged ‘good’ if it is somehow better than the market alternative. Too often you hear people point to the imperfections in one market and use that as a rationale for government involvement. We must strive to be better than that and avoid arguing against strawmen of our own construction.

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