Political Solutions to Market Problems

Abstract

For some, market failures serve as a rationale for public intervention. However, the fact that self-interested market behavior does not always produce felicitous social consequences is not sufficient reason to draw this conclusion. It is necessary to assess public performance under comparable conditions, and hence to analyze self-interested political behavior in the institutional structures of the public sector. Our approach emphasizes this institutional structure—warts and all—and thereby provides specific cautionary warnings about optimistic reliance on political institutions to improve upon market performance.