Economists spend a great deal of time studying market failure. In fact, as George Mason University economics professor Tyler Cowen notes, “most economic arguments for government intervention are based on the idea that the marketplace cannot provide public goods or handle externalities. Public health and welfare programs, education, roads, research and development, national and domestic security, and a clean environment all have been labeled public goods.”
So when The Heritage Foundation’s Economic Freedom Task Force published its 2014 Global Agenda for Economic Freedom last week and identified many government-created market failures around the world, one would assume that such findings would be of great interest to economists, right? The answer, according to Stanford University economics professor John Taylor, is no.
Taylor reports on a recent analysis of 23 leading basic economics textbooks by public-choice economists Jim Gwartney and Rosemarie Fike that “reveals huge differences in the coverage of government failure versus market failure.” The study (“Public Choice versus the Benevolent Omniscient Planner Model of Government: Evidence from Principles Textbooks”), tabulated, in Taylor’s words, “references to various types of market failure and government failure…[and] categorized the explanations of market failure (say due to externalities, public goods, market power,…) and government failure (say due to special interests, short-sightedness, rent-seeking,…).”
The results? Perhaps not surprisingly, the textbooks spend much more time talking about market failures and government programs to remedy them than about the many failures of government that have contributed to such calamities as the 2008 financial crisis. On average, Gwartney and Fike found only about one mention of government failure for every six mentions of market failure.
As George Mason economics professor Don Boudreaux noted, the number of mentions of government failure or public-choice theory in the introductory textbook by Paul Krugman? Zero. And that despite Krugman’s “many mentions of market failure.” We are going to send a copy of the 2014 Global Agenda for Economic Freedom to Professor Krugman.