The choice of whether to recommend a market solution or a government intervention to address an economic or social problem is the eternal issue of public policy analysis. Throughout the decades, academics, policymakers, and the public have alternated between market friendly and market skeptical perspectives. But do these shifting views accurately reflect our knowledge about market and government performance?
In this book, Clifford Winston examines the extensiveness and persistence of government failures in the US economy and the potential for market corrections to address those failures. He provides empirical evidence that strongly questions the effectiveness of government interventions and he explores whether markets can self-correct to solve economic and social problems more efficiently.
Government failures are defined and categorized and the extensive evidence on government failures is synthesized and assessed. Despite the positive theoretical expectations of government interventions, the empirical evidence reveals that they have significantly reduced economic welfare. Theoretical explanations of government failure are then evaluated and found to be lacking in their ability to guide efficient policy reforms. Finally, the robustness of markets to overcome their inefficiencies or failures is characterized in terms of market corrections. Empirical evidence is presented to show that, in contrast to government failures, markets have often corrected their failures.
The implications of the book for academics and policymakers are that when they are considering the efficacy of a market solution or a government intervention to address an economic or social problem, they should be much more cognizant of the potential for government failure and for this failure to persist. At the same time, they also should take a long-run view of markets and account for their ability to self-correct. Thus, a more stable perspective toward markets and government is called for where market corrections not government interventions are envisioned as offering a path for improving the US economy.
