“The point, rather, is to provide background for asking why the free-rider, collective-action, externality problems that are regularly identified as sufficient reason for restricting the role and scope of markets are so seldom identified as reasons for restricting the role and scope of government”. (1)
A most excellent question.
If neighborhood effects aka externalities exist in the private sector, do they not exist in the government sector? In essence one is examining a subsection of : if markets fail, governments fail too.
One might observe the following: externality problems, in a market environment, are many times depicted without the counterpart of positive externalities. Stated alternatively, the proposition of externalities is only a negative sum with no countervailing positive sum.
The above depiction is not an economic position. The purposeful ommission to depict, expound upon, discuss and otherwise recognize the positive externality or summations of interacting positive externalities is a political proposition.
The afore mentioned market externality proposition framed as a political position creates an incentive for the particular politico to depict government intervention as zero or positive externalities. Negative externalities are, extrodinarily, and purposely, not present. Hence, no cascading unintended consequences reflecting back upon market mechanisms.
Going back to the original question: “The point, rather, is to provide background for asking why the free-rider, collective-action, externality problems that are regularly identified as sufficient reason for restricting the role and scope of markets are so seldom identified as reasons for restricting the role and scope of government”.
The answer may exist in purposeful politics.
Notes:
(1) An Asymmetry, http://cafehayek.com/2011/11/an-asymmetry.html
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