EconTalk Does Market Failure Justify Government Intervention? (with Michael Munger)
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Jun 17, 2024 
Michael Munger, an economist at Duke University renowned for his insights on public choice theory, discusses the complex interplay between market failure and government intervention. He highlights the often-overlooked concept of government failure and questions whether interventions truly outperform market outcomes. Munger examines decision-making in healthcare, advocating for a balance between democratic values and expert governance. He critiques bureaucratic efficiency perceptions and emphasizes the need for innovative solutions beyond traditional government or market roles.
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Bergson's Folly
- Abram Bergson believed knowing production functions and indifference functions would solve resource allocation.
- This assumes governments can know consumer preferences, which is unrealistic.
Trial and Error vs. Experts
- Trial and error drives private decision-making and innovation, as seen with the Wright brothers.
- Government interventionists believe expert committees, insulated from politics, can outperform this.
Flawed Incentives
- Both private companies and government bureaucrats have flawed incentives: greed versus lack of skin in the game.
- Competition constrains private greed, while elections and noble sentiments ideally constrain bureaucrats.