The anatomy of government failure

Abstract

Government failure is a much bigger problem than its contemporary treatment implies. Setting aside natural disasters, most of the great catastrophes of human history have been government failures of one sort or another. We argue that many so-called market failures are government failures because government defines the institutions in which markets succeed or fail. The concept of government failure has been trapped in the cocoon of the theory of perfect markets. Narrowly defined deviations from market perfection have been designated market failures, for which government corrections may or may not really be a solution. Government failure in the contemporary context means failing to resolve a classic market failure. We propose an alternative approach for evaluating whether government fails: the Pareto standard. If an available Pareto improvement is not chosen, or is not implemented, that is a government failure. We organize government failure into two types: substantive and procedural. Substantive failures include the inability or unwillingness to maintain order, to maintain sound fiscal and monetary policies, and to reduce risks of transaction costs, which we classify as corruption, agency and rent-seeking. Procedural failures are inadequacies of available social choice mechanisms, causing collective decisions to be arbitrary, capricious, or manipuated. We conclude with some reflections on human rationality and the implications of behavioral economics.

Do government formation deadlocks really damage economic growth? Evidence from history's longest period of government formation impasse

“…Caretaker governments are understood to be responsible solely for "ordinary" issues and should not adopt any decisions likely to constrain the options of the future government. 7 WGI-WB data can be consulted at www.govindicators.org (see also specific information for EU countries in 2010 in Kaasa, 2013); data for EQI-QofG for 2010 are available at https://qog.pol.gu.se/data/datadownloads/qog-eqi-data; data from GCR-WEF for 2010 are available at http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2010-11.pdf 8 A specific issue related to good governance is the quality of bureaucracy, as emphasized in La Porta et al (1999) and Keech and Munger (2015). See Brans (2012) for an analysis of the role of civil servants and public managers in guaranteeing the continuity of government operations.…”

“…For the most recent long period of government deadlock formation within the EU (Germany in 2017-2018), see the chronicle in The New York Times at https://www.nytimes.com/2017/11/ 20/world/europe/germany-merkel-coalition.html. 7 WGI-WB data can be consulted at www.govindicators.org (see also specific information for EU countries in 2010 in Kaasa, 2013); data for EQI-QofG for 2010 are available at https://qog.pol.gu.se/data/datadownloads/qog-eqi-data; data from GCR-WEF for 2010 are available at http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2010-11.pdf 8 A specific issue related to good governance is the quality of bureaucracy, as emphasized in La Porta et al (1999) and Keech and Munger (2015). 3 It is worth noting that other influential studies raise questions about the direction of the causal relationship between institutions and economic development and sustain that it is good policies and economic growth that promote institutional improvement (Glaeser, La Porta, Lopez-de-Silanes, & Shleifer, 2004;Sachs, 2003) 4 Di Rupo tendered his resignation on August 29, but the king refused to accept it and asked him to continue with his efforts to break the deadlock.…”

From ‘What Is New Political Economy’ to ‘Why Is Everything New Political Economy?’

“…They saw themselves as part of "a rebellion against a profession that they believed was overemphasizing the limits of markets and the prospects for welfareenhancing government intervention" (Medema, 2011, p. 242). Thus, public choice research focused on "government failures" (Keech, Munger, 2015), arguing that most market failures were actually brought about by the government itself (Marciano, 2013). This is by no means an exhaustive account of the history of public choice (for that reason I direct the reader to the bibliography mentioned above), but to show its basic tenets and how wide the field of application of public choice is.…”

Economies through Application of Nonmedical Primary-Preventative Health: Lessons from the Healthy Country Healthy People Experience of Australia’s Aboriginal People

“…Bryant et al [ 11 ], in the case of Canada, and Fisher et al [ 12 ], in the case of Australia, commented on this failure, and noted an apparent preference by policy makers to focus on the delivery of health care/curative health. As explained in the following, economists, such as Keech and Munger [ 13 ], and Watts and Segal [ 14 ], identify such resource misallocation as government policy failure.…”