by Veronique de Rugy
December 05, 2013
Congress spends a great deal of time discussing the need to address market failures such as monopolies and pollution. However, even when such a problem does exist, the policies implemented to address it are often ineffective or undesirable. That’s because, as public choice economists have pointed out, while there may be market failures, there are also government failures. Public choice theory applies economic analysis—or the study of how incentives influence behavior—to politics. For instance, economists assume that people interacting in the marketplace are mostly driven by self-interest. Public choice economists make the same assumption about government actors. Unlike in the marketplace, the incentives for good management in government are very weak.