John argues:
“Roy’s argument about omniscient or semi-omniscient planners proves too much. It basically rebuts the need for or utility of any government activity at all…For example, because it is impossible to know the precisely optimum amount of taxpayer expenditures on the court system, law enforcement, or unlimited-access streets ? spend too little and you underproduce the valuable good but spend too much and you get diminishing returns and waste of tax dollars ? government shouldn’t do any of these things.”
First of all, my point is not that John or the government cannot precisely identify an optimum but that an optimum only exists within the context of an economic model that is itself undefinable. If the ?optimum? is meaningless and undefinable then any notion of under or over production relative to that optimum is also meaningless and undefinable. Unless John is willing to defend the use of that model as a policy benchmark, or identify another model and another optimum–or possibly invent a new one and win Nobel Prize in economics–then what is truly “silly” is his insistence on using terminology like “over” and “under production.”
John suggests that if one does not accept this “market failure” analysis that is the underpinning of his public goods argument then all justification for government collapses. Given the conceptual and intellectual status of these arguments, I would hope that he has a back-up plan. Places where he might search for an alternative approach include Robert Nozick or even Ayn Rand, neither of whom relied on standard public goods arguments for a minimal state. While the cases that these philosophers made were not perfect they clearly have fewer holes than the argument John is relying on. On the other hand I don?t think that either Rand or Nozick would provide a framework that would allow John to arrive at his desired policy conclusion?compulsory, government-funded education.
I would like to note that this debate has shifted ground. My original post was on the dangers vouchers pose to the autonomy of private schools. John’s response devoted only a few lines to this issue, basically asserting that given his priorities, it?s worth the risk. The majority of his response focused on whether government should fund education at all, an issue that I did not mention in my original post. But I took the bate and defended the more radical, i.e. the more consistent with liberty, position. Now, John is attempting to shift the debate once again by suggesting that if you don’t accept the standard market failure/public goods theory then the only thing left is to be an anarchist. This is a reductio ad absurdum that just doesn’t fly. If the primary defense of the existence of a state is the over/under production fallacies of market failure theory then the anarchists are on much firmer ground than even they believe.
Finally, I would like to blow my own horn for a minute. If anyone would like to pursue the arguments made in these posts regarding externalities, public goods, and market failure theory in greater detail, I suggest that you dig up a copy of my now out of print book on the subject. The title is Welfare Economics and Externalities in an Open Ended Universe. It was published by Kluwer Academic Publishers back in 1992.
