Government or Markets?

     Tea partiers would have us believe that anything that the government touches becomes inefficient and wasteful, and that they’re not operating on unsubstantiated assumptions. Many economists have written about public choice theory, which essentially points out that any time that you create a structure that gives people power you create interests that will work for their own profit. Politicians are seen as profiteers who look out for their own interests (by pleasing lobbyists who get them re-elected) and the interests of local constituents (to the detriment of the ‘public good’ eg. pork). These economists, and subsequently the tea party, advocate letting people make individual choices in their self-interest and allow the free market to balance the aggregate interests for the greatest overall benefit. They have the rhetorical advantage of both advocating individual liberty and the collective good.
    There are problems with this explanation of economic and political reality, however. First, individuals acting in their own self-interest frequently do not aggregate into the socially optimal outcomes. This failure is due to a number of characteristics of free markets: They quantify demand through price, thus shifting decision-making power to the rich. They operate on expectations of supply and demand rather than reality and are therefore vulnerable to mass optimism or pessimism (bubbles). They remove accountability of producers and consumers by stripping products of their context through the price mechanism (Where and how were your food and clothes made?).
    Second, markets allocate efficiently most of the time, but it is not clear whether efficiency should be the end goal of allocation. I don’t believe that we really want a completely efficient allocation of healthcare, because by definition it would leave ‘inefficient’ people like the old and terminally ill without care. If we do not really want complete efficiency, but rather want a principle of justice and equality to guide resources like healthcare, then we need to direct markets and create incentives to promote those principles. This is where the government comes in.
    Government is the only option we have to regulate industries as big and complex as health and finance (and sectors as important as education). Additionally, individuals in this country have direct influence over and checks and balances on government power, while they have none over markets (because we as individuals can’t interfere with others’ private property). I agree that government is not the most efficient option to allocate resources. However, in addition to efficiency being a poor moral compass free markets have inherent tendencies that are antagonistic of social goods. So let’s see how we can improve government, not get rid of it.