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Government Success vs Market Success

Xerographica

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The point of government is to make up for the deficiencies/inadequacies/shortcomings/failings of the private sector...

It is, of course, not desirable that anything should be done by funds derived from compulsory taxation, which is already sufficiently well done by individual liberality. - J.S. Mill, Principles of Political Economy with some of their Applications to Social Philosophy
The question is, how can we determine just how badly the private sector is failing? In order to accurately correct for the private sector's deficiencies, the government needs access to what people in the private sector know.

What do private sector people know? They know external things (surroundings, circumstances, situations, environments) and internal things (values). They know how many potholes they run over (external) and how much cancer research they'd sacrifice to fix them (internal). They know how many times they've been mugged (external) and how much education they'd sacrifice for more police (internal). They know how many nights they've lost sleep because of the threat of terror (external) and how much space exploration they'd sacrifice for more peace of mind (internal).

So how does the government gain access to all this relevant information? Here are some possible responses...

1. Congresspeople don't need this information
wat?
2. Congresspeople are omniscient
With the help of equations and diagrams, Samuelson showed how the planner would derive for each individual his demand function and the collective consumption goods that would contribute to his utility maximization. In this system, the planner is expected to have an omniscient presence and be able to ascertain individual preferences even when they are not voluntarily revealed. Samuelson attempted to show the combination of public and private goods and their distribution that would maximize social welfare. His concern was with the total community's welfare and with all goods; it did not have much to do with the central reality of the budget in the ordinary world. - A. Premchand, Government Budgeting and Expenditure Controls: Theory and Practice
"Market failure" has always been defined as being present when conditions for Pareto-optimality are not satisfied in ways in which an omniscient, selfless, social guardian government could costlessly correct. One of the lessons of experience with development is that governments are not omniscient, selfless, social guardians and corrections are not costless. - Anne O. Krueger, Government Failures in Development
The Founding Fathers of public choice, in some cases by design and in other cases by accident, effectively leveled the playing field in the debate over the relative merits of governments and private markets. This playing field, by the mid-1950s, had become undeniably prejudiced in favor of an allegedly omniscient and impartial government. - Charles K. Rowley, Public Choice from the Perspective of the History of Thought
Samuelson, laying particular emphasis on the problem of preference revelation, takes as a premise the existence of an omniscient planner. - Christian Bastin, Theories of Voluntary Exchange in the Theory of Public Goods
The new welfare economists view private markets as failing extensively because of perceived weaknesses in property rights, pervasive externalities and public goods and widespread asymmetries in information. In contrast, they view democratic government as benevolent, omniscient and impartial in its role as the White Knight riding to rescue individuals from unavoidable private market failures (Baumol and Oates, 1988). The public choice revolution redressed this bias by analysing government as it is and not as a figment of some excessively cloistered imagination. - Donald Wittman, Efficiency of Democracy?
To accurately choose which vector of policies is wealth-maximizing, the government would need to know how every person would act under these new policies—something which would require omniscience on the part of government agents. - Edward Stringham, Kaldor-Hicks Efficiency and the Problem of Central Planning
In what follows we shall assume an omniscient planner who seeks to maximize social welfare subject to the scarcity constraints of the economy. This is standard practice in normative economics. - Elisha A. Pazner, Merit Wants and the Theory of Taxation
A social efficiency objective implies a single mind to which all resource supply conditions and all consumer attitudes are simultaneously given. Otherwise, there can be no coherent notion of a relevant optimum. The entire notion of a 'social choice' presumes, in principle, the relevance of imagined omniscience. - Israel M. Kirzner, How Markets Work
The complexities of modern politics and bureaucracy should not, however, conceal the underlying realities, and gross misunderstanding can result if individual participation in, and reaction to, public decisions is either neglected or assumed away. The omniscient and benevolent despot does not exist, despite the genuine love for him sometimes espoused, and, scientifically, he is not a noble construction. To assume that he does exist, for the purpose of making analysis agreeable, serves to confound the issues and to guarantee frustration for the scientist who seeks to understand and to explain. - James M. Buchanan, Public Finance in Democratic Process
The possible advantages are, however, greatly increased when the unrealistic assumption of omniscient planning is relaxed and the preference-revelation problems in a world of diverse preferences are explicitly recognized. - John G. Head, Public Goods and Multi-Level Government
The traditional approach describes the allocation and distributive failures of the market, and the normative role of government in correcting those failures. Tax revenues from several sources are put into a single pot, a general fund, from which public services are provided. Equity in raising taxes is judged by ability to pay rather than by the benefit criterion on which earmarking is based. In the orthodox account, the government is shown to act as an omniscient and benevolent institution which improves on the market outcome and achieves an efficient allocation of resources. Traditional theory employs the device of a 'social welfare function' which guides an independent decision-taking budgetary authority. Critics of this account argue that in this approach, 'the government' is a black box into which voter preferences are fed and from which outcomes, which are claimed to be welfare-maximizing, emerge. - Margaret Wilkinson, Paying for Public Spending - Is There a Role for Earmarked Taxes
The well-known Samuelson (1954, 1955) public goods articles offer a good example. Samuelson titles his first article “The Pure Theory of Public Expenditure,” indicating that his analysis of a possible market failure in the production of public goods is, in fact, not a theory, but the theory, of public expenditure even though the article contains no analysis of how government would succeed in producing public goods where the market would fail. The only way Samuelson's public good theory can be a theory of government expenditure is if the government is an omniscient benevolent dictator. - Randall G. Holcombe, Make Economics Policy Relevant: Depose the Omniscient Benevolent Dictator
Though an old theme, Samuelson’s rigorous analysis of public goods in a general equilibrium setting (Samuelson 1954) captured the attention of a wide range of theorists, and soon became the center of fiscal theory. Wicksell’s concern with how to secure preference revelation was noted but set aside as unmanageable by economic analysis. Implementation of budget choice was again left to an omniscient referee. - Richard A. Musgrave, Public finance and three branch model
The problem would disappear if government were omniscient, as implicitly assumed by Hotelling, but government is not omniscient and throughout his career Coase has insisted very sensibly that in evaluating the case for public intervention one must compare real markets with real government, rather than real markets with ideal government assumed to work not only flawlessly but costlessly. - Richard A. Posner, Nobel Laureate: Ronald Coase and Methodology
PPB analysis rests upon much the same theoretical grounds as the traditional theory of public administration. The PPB analyst is essentially taking the methodological perspective of an "omniscient observer" or a "benevolent despot." Assuming that he knows the "will of the state," the PPB analyst selects a program for the efficient utilization of resources (i.e., men and material) in the accomplishment of those purposes. As Senator McClelland has correctly perceived, the assumption of omniscience may not hold; and, as a consequence, PPB analysis may involve radical errors and generate gross inefficiencies. - Vincent Ostrom and Elinor Ostrom, Public Choice: A Different Approach to the Study of Public Administration
3. Our political process allows citizens to adequately communicate their preferences to congresspeople.

Check out my terrible illustration skills...





Graph 1 - what government success would look like
Graph 2 - what government failure looks like
Graph 3 - the breadth/depth of market failure is unknown

If we don't know the breadth/depth of market failure, then can we ever honestly say that the government is successfully supplying something that there's an actual demand for?
 
The only government "success" that I'm aware of occurs when the government enables private activity: the Erie Canal, the Homestead Act, railroads, highways, irrigation projects, and the like. When the government ventures into the area of providing a retail service, it fails miserably and can only survive by mandating a monopoly position for itself. Notable failures include the post office, Indian Health Service, and VA services - and that's just off the top of my head. Is there a public transportation system anywhere in the country that can survive without massive subsidies each year?
 
The point of government is to make up for the deficiencies/inadequacies/shortcomings/failings of the private sector...


The question is, how can we determine just how badly the private sector is failing? In order to accurately correct for the private sector's deficiencies, the government needs access to what people in the private sector know.

What do private sector people know? They know external things (surroundings, circumstances, situations, environments) and internal things (values). They know how many potholes they run over (external) and how much cancer research they'd sacrifice to fix them (internal). They know how many times they've been mugged (external) and how much education they'd sacrifice for more police (internal). They know how many nights they've lost sleep because of the threat of terror (external) and how much space exploration they'd sacrifice for more peace of mind (internal).

So how does the government gain access to all this relevant information? Here are some possible responses...

1. Congresspeople don't need this information
wat?
2. Congresspeople are omniscient
3. Our political process allows citizens to adequately communicate their preferences to congresspeople.

Check out my terrible illustration skills...





Graph 1 - what government success would look like
Graph 2 - what government failure looks like
Graph 3 - the breadth/depth of market failure is unknown

If we don't know the breadth/depth of market failure, then can we ever honestly say that the government is successfully supplying something that there's an actual demand for?

How about the Government gets the information in the exact same way the private sector gets the information ......

Also those graphs are just made up arn't they .... you basically just drew them yourself and made them up, they are not based on ANY data.

as for the "responses" no one EVER says 1 and 2, it's a strawman.

As for the question. No the government is not only around to make up for the deficiencies of hte private sector, there are certain things that we determine to be the commons, that belong in the commons, and the government (or some comparable entity) manages the commons. For example some countries determine healthcare to be the commons.

Like most of you're posts this one is not thought out at all.
 
The point of government is to make up for the deficiencies/inadequacies/shortcomings/failings of the private sector...

The question is, how can we determine just how badly the private sector is failing? In order to accurately correct for the private sector's deficiencies, the government needs access to what people in the private sector know.

They have access to this, but in the US and some other countries it will not matter because politics and personal gain triumph over doing the right thing based on fact.

But you have 2 situations. You have market failure due to government meddling and market failure due to lack of government meddling.

If we look at Italy you have a market that has failed due to over regulation and government meddling. But saying that, this meddling has come due to the private sector wanting the regulation to keep the themselves in power and avoid competition and they use government to ensure this. Not unlike what is happening in the US in many industries.

If we look at the credit crisis of 2007, it was a clear situation of market failure due to lack of government meddling. Basically the private sector got drunk with greed.

Problem is that government action against market failure mostly happens after the market has failed and even then in modern politics in the US, that does not even happen.
 
The point of government is to make up for the deficiencies/inadequacies/shortcomings/failings of the private sector...

Ummm...

Is this in the U.S. Constitution somewhere? I don't think I've ever seen it, myself.
 
Ummm...

Is this in the U.S. Constitution somewhere? I don't think I've ever seen it, myself.

Our current system is based on the assumption that congresspeople are omniscient (True/False).
 
Like most of you're posts this one is not thought out at all.

Hmmm...there's a disparity between your thoughts and the thoughts of Harvard professor Samuel DeCanio...Democracy, the Market, and the Logic of Social Choice. You would have realized this if you had actually read the paper. But you didn't read the paper. As long as I read papers while you pick your nose, then I will always stomp you.
 
Hmmm...there's a disparity between your thoughts and the thoughts of Harvard professor Samuel DeCanio...Democracy, the Market, and the Logic of Social Choice. You would have realized this if you had actually read the paper. But you didn't read the paper. As long as I read papers while you pick your nose, then I will always stomp you.

Maybe after reading all those papers you could come up with a coherant argument, other than just saying "this professor disagrees with you." or actually FOR ONCE deal with arguments others posit.
 
I love when people make models without bothering to test them.

I am going to build a car tomorrow and try to sell it, without driving it first.
 
I love when people make models without bothering to test them.

I am going to build a car tomorrow and try to sell it, without driving it first.

Excellent analogy!
 
Nobody is omniscient.

It was a true/false question. Here it is again. Our current system is based on the assumption that congresspeople are omniscient (True/False).
 
It was a true/false question. Here it is again. Our current system is based on the assumption that congresspeople are omniscient (True/False).

If you lack the reasoning to figure out that his statement clearly implied false, then it makes sense how you can reason to assume so much without evidence.
 
I love when people make models without bothering to test them.

I am going to build a car tomorrow and try to sell it, without driving it first.

Are you seriously critiquing untested models? In my OP I shared numerous passages on the model that our current system is based on. Given that you're critiquing untested models...I'm guessing you didn't even read them. So here they are again...

With the help of equations and diagrams, Samuelson showed how the planner would derive for each individual his demand function and the collective consumption goods that would contribute to his utility maximization. In this system, the planner is expected to have an omniscient presence and be able to ascertain individual preferences even when they are not voluntarily revealed. Samuelson attempted to show the combination of public and private goods and their distribution that would maximize social welfare. His concern was with the total community's welfare and with all goods; it did not have much to do with the central reality of the budget in the ordinary world. - A. Premchand, Government Budgeting and Expenditure Controls: Theory and Practice
"Market failure" has always been defined as being present when conditions for Pareto-optimality are not satisfied in ways in which an omniscient, selfless, social guardian government could costlessly correct. One of the lessons of experience with development is that governments are not omniscient, selfless, social guardians and corrections are not costless. - Anne O. Krueger, Government Failures in Development
The Founding Fathers of public choice, in some cases by design and in other cases by accident, effectively leveled the playing field in the debate over the relative merits of governments and private markets. This playing field, by the mid-1950s, had become undeniably prejudiced in favor of an allegedly omniscient and impartial government. - Charles K. Rowley, Public Choice from the Perspective of the History of Thought
Samuelson, laying particular emphasis on the problem of preference revelation, takes as a premise the existence of an omniscient planner. - Christian Bastin, Theories of Voluntary Exchange in the Theory of Public Goods
The new welfare economists view private markets as failing extensively because of perceived weaknesses in property rights, pervasive externalities and public goods and widespread asymmetries in information. In contrast, they view democratic government as benevolent, omniscient and impartial in its role as the White Knight riding to rescue individuals from unavoidable private market failures (Baumol and Oates, 1988). The public choice revolution redressed this bias by analysing government as it is and not as a figment of some excessively cloistered imagination. - Donald Wittman, Efficiency of Democracy?
To accurately choose which vector of policies is wealth-maximizing, the government would need to know how every person would act under these new policies—something which would require omniscience on the part of government agents. - Edward Stringham, Kaldor-Hicks Efficiency and the Problem of Central Planning
In what follows we shall assume an omniscient planner who seeks to maximize social welfare subject to the scarcity constraints of the economy. This is standard practice in normative economics. - Elisha A. Pazner, Merit Wants and the Theory of Taxation
A social efficiency objective implies a single mind to which all resource supply conditions and all consumer attitudes are simultaneously given. Otherwise, there can be no coherent notion of a relevant optimum. The entire notion of a 'social choice' presumes, in principle, the relevance of imagined omniscience. - Israel M. Kirzner, How Markets Work
The complexities of modern politics and bureaucracy should not, however, conceal the underlying realities, and gross misunderstanding can result if individual participation in, and reaction to, public decisions is either neglected or assumed away. The omniscient and benevolent despot does not exist, despite the genuine love for him sometimes espoused, and, scientifically, he is not a noble construction. To assume that he does exist, for the purpose of making analysis agreeable, serves to confound the issues and to guarantee frustration for the scientist who seeks to understand and to explain. - James M. Buchanan, Public Finance in Democratic Process
The possible advantages are, however, greatly increased when the unrealistic assumption of omniscient planning is relaxed and the preference-revelation problems in a world of diverse preferences are explicitly recognized. - John G. Head, Public Goods and Multi-Level Government
The traditional approach describes the allocation and distributive failures of the market, and the normative role of government in correcting those failures. Tax revenues from several sources are put into a single pot, a general fund, from which public services are provided. Equity in raising taxes is judged by ability to pay rather than by the benefit criterion on which earmarking is based. In the orthodox account, the government is shown to act as an omniscient and benevolent institution which improves on the market outcome and achieves an efficient allocation of resources. Traditional theory employs the device of a 'social welfare function' which guides an independent decision-taking budgetary authority. Critics of this account argue that in this approach, 'the government' is a black box into which voter preferences are fed and from which outcomes, which are claimed to be welfare-maximizing, emerge. - Margaret Wilkinson, Paying for Public Spending - Is There a Role for Earmarked Taxes
The well-known Samuelson (1954, 1955) public goods articles offer a good example. Samuelson titles his first article “The Pure Theory of Public Expenditure,” indicating that his analysis of a possible market failure in the production of public goods is, in fact, not a theory, but the theory, of public expenditure even though the article contains no analysis of how government would succeed in producing public goods where the market would fail. The only way Samuelson's public good theory can be a theory of government expenditure is if the government is an omniscient benevolent dictator. - Randall G. Holcombe, Make Economics Policy Relevant: Depose the Omniscient Benevolent Dictator
Though an old theme, Samuelson’s rigorous analysis of public goods in a general equilibrium setting (Samuelson 1954) captured the attention of a wide range of theorists, and soon became the center of fiscal theory. Wicksell’s concern with how to secure preference revelation was noted but set aside as unmanageable by economic analysis. Implementation of budget choice was again left to an omniscient referee. - Richard A. Musgrave, Public finance and three branch model
The problem would disappear if government were omniscient, as implicitly assumed by Hotelling, but government is not omniscient and throughout his career Coase has insisted very sensibly that in evaluating the case for public intervention one must compare real markets with real government, rather than real markets with ideal government assumed to work not only flawlessly but costlessly. - Richard A. Posner, Nobel Laureate: Ronald Coase and Methodology
PPB analysis rests upon much the same theoretical grounds as the traditional theory of public administration. The PPB analyst is essentially taking the methodological perspective of an "omniscient observer" or a "benevolent despot." Assuming that he knows the "will of the state," the PPB analyst selects a program for the efficient utilization of resources (i.e., men and material) in the accomplishment of those purposes. As Senator McClelland has correctly perceived, the assumption of omniscience may not hold; and, as a consequence, PPB analysis may involve radical errors and generate gross inefficiencies. - Vincent Ostrom and Elinor Ostrom, Public Choice: A Different Approach to the Study of Public Administration
 
If you lack the reasoning to figure out that his statement clearly implied false, then it makes sense how you can reason to assume so much without evidence.

You're assuming his answer. I'm not willing to assume what he knows...which is why I asked for clarification. Therefore, this evidence clearly proves that you're willing to assume far more than I am.
 
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