Clifford Winston on Market Failure and Government Failure

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4.7 • 4.3K Ratings

🗓️ 28 December 2009

⏱️ 66 minutes

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Summary

Clifford Winston of the Brookings Institution talks about the ideas in his book, Market Failure vs. Government Failure, with EconTalk host Russ Roberts. Winston summarizes a large literature on antitrust, safety regulation and environmental regulation. He finds that government regulation often fails to meet its objectives. While markets are imperfect, so is government. Winston argues that idealized theories of government intervention based on textbook theories of market failure are not the way regulation turns out in practice. He argues that special interest politics explains much of the disappointing outcomes of government regulation.

Transcript

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0:00.0	Welcome to Econ Talk, part of the Library of Economics and Liberty. I'm your host Russ Roberts
0:13.9	of George Mason University and Stanford University's Hoover Institution. Our website is econtalk.org
0:21.2	where you can subscribe, find other episodes, comment on this podcast, and find links to
0:26.5	another information related to today's conversation. Our email address is mailadicontalk.org. We'd
0:33.6	love to hear from you. Today is December 18, 2009, and my guest is Clifford Winston,
0:42.7	Senior Fellow at the Brookings Institution, and the author and editor of many books, including
0:48.5	what we're going to talk about today, Government Failure versus Market Failure. Cliff,
0:52.6	welcome to Econ Talk. Great to be here. Your title is Government Failure versus Market Failure.
1:00.2	Most people hear the term market failure. It gets thrown around a lot today, often to mean
1:06.0	things like markets didn't do what I wanted them to do. They failed me, or they failed what I'd
1:12.2	hope they do. That's not what economists usually mean by market failure. We have a fairly narrow
1:17.9	definition. Why don't we start with talking about what the standard textbook definition of
1:23.0	market failure is, and then we'll talk about Government Failure. Okay, sure. Well, market failure,
1:28.0	right, is something that everyone has their own idea about. Things didn't work out for them,
1:33.8	but economists have a very precise notion of what market failure is, and it does focus on what we
1:41.5	call efficiency issues as the allocation of resources. Effectively, what we're looking at are
1:49.8	situations where we get an equilibrium where it would be possible to make one person better off
1:57.5	without making anybody worse off, and there's a technical term for that Pareto optimality,
2:06.0	but that's sort of a standard name for a market failure that you can reallocate resources
2:12.2	in a way to make at least one person better off without making anybody worse off now.
2:17.0	That seems pretty attractive, and it's named for the great, I always like this name, so I'm
2:21.7	going to give this full name, the Italian economist. It's the late 19th century, I think,
	...

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