Letting a Thousand Flowers Bloom
How are we to distinguish whether government or the market is a better solution to a particular problem? In this episode, EconTalk host Russ Roberts takes on a listener’s question with his colleague Don Boudreaux. Boudreaux criticizes the mainstream economics approach, charging that it’s looking for market failures where perhaps there are none. Boudreaux argues that “letting the market handle things” allows more sophistication, creativity, and humility.
The conversation begins with an overview of the traditional approach, and Roberts and Boudreaux challenge listeners to consider how we know when we see a market failure. In unequal income distribution a market failure, for example? See below for some more questions to ponder about the conversation.
1- Why does Boudreaux object to the term market failure? How does he suggest we should think about such problem instead?
2- Roberts describes a variety of ways we might respond to an instance of “market failure.” What are these ways? What other ways might you suggest? How can we know which approach is best in a given situation?
3- How has public choice scholarship influenced the way some economists think about market failure? How can governments manipulate incentives to mimic the results of the market? To what extent ought we to prefer such decentralize solutions government solutions over market solutions? Explain.
5- What’s the real source of monopoly power, according to Boudreaux? Why doesn’t he think WalMart is a monopoly, and why does he feel certain it will go bankrupt someday? What does he mean when he says that maximizing output today is comes at the expense of reducing output in the long run?