WP 2023-02.
Executive Summary
We argue to look at the polity with the very same vista with which modern economics looks at markets, as the polity is nothing but the market for political services. Government failure can then be understood as the failure of the market for politics. We show how the systematic application of the economic theory of market failure can provide new insights and perspectives with respect to the underlying causes of government failure. Typical reasons for government failure are linked to externalities, monopoly power, and asymmetric information. Thereby, we can gain valuable insights and new perspectives on how to improve the functioning of political markets and institutions.
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The case for liberalism: Pervasive market failure in the economy and the polity
