Ronald Coase: On the Market for Goods and the Market for Ideas

Mark - interesting post. The status quo seems to be that both ideas and goods are regulated, to an arbitrary degree depending upon how the particular good or idea is perceived by politicians influenced via the usual mechanisms. Informational issues are often cited as a 'market failure' and as a pretext for intervention, ignoring the problems of government failure and its own lack of knowledge. Moreover, many of the perceived problems of our 'market' economy are caused by a pre-existing state intervention and lack of marketisation. I won't review the argument - that seems to be what your book is largely concerned with. I would suggest that a sensible response and a classical liberal (Whiggish) programme is to preclude action by the state except where property rights are negatively affected (including 'communal' property, which ought to be minimised as far as possible). I don't see that the state should intervene where there is a perception that positive externalities are being 'underprovided' either. Areas where property rights are at question are proper areas for state intervention - this does not mean, however, that the state must intervene or is the best mechanism for solutions, but those questions must be decided by some sort of political process. Ideally such a process will be democratic and subject to a wide variety of constitutional checks and balances within its tightly defined boundaries. Any attempt by government to exceed its bounds and interfere in areas where there are not property rights at stake would have to be struck down as ultra vires - of course, this is easy to state as a principle but is very hard to achieve in practice, even if we were starting with a blank slate. Still, I think it's good to have big ambitions! Such a circumscribed role for the state would mean that the problems of 'government failure' as pointed out by Coase and Caplan would be minimised - I don't see how they can be eliminated without being an anarchist and that has problems of its own. To my mind, Caplan's logic (and Coases') suggests that that we need to circumscribe the areas in which government operates rather than eliminate democracy and create some sort of benevolent dictatorship of economists - I don't think I need to outline the problems of that approach.

I always like an excuse to quote Lord Salisbury's 1877 remark about 'experts: "No lesson seems to be so deeply inculcated by the experience of life as that you never should trust experts. If you believe the doctors, nothing is wholesome: if you believe the theologians, nothing is innocent: if you believe the soldiers, nothing is safe. They all require to have their strong wine diluted by a very large admixture of insipid common sense." Those of us who are, or are reputed to be, 'experts' in one field or another usually have enough self-knowledge and humility to recognise how much we don't know. So I certainly wouldn't want to put so-called experts in charge.