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8 Cato J. 1 (1988-1989)
Market Failure and Political Failure

handle is hein.journals/catoj8 and id is 3 raw text is: MARKET FAILURE AND POLITICAL FAILURE James M. Buchanan I. Introduction On several occasions, I have summarized the theoretical welfare economics of the mid-century decades as theories of market failure and the public choice economics of the post-middle decades as coun- terpart theories of political failure. This statement captures the central thrusts of the two research programs, but, nonetheless, the statement is confusing because it suggests that both positive analyses of institutional operation and criteria for operational failure are com- parable over the two applications. The criterion for success, and hence, failure, applied to the oper- ation of a market order by the practitioners of theoretical welfare economics is widely recognized to be efficiency in the utilization of economic resources. But both the meaning and the normative appro- priateness of the efficiency criterion can be questioned. If effi- ciency is attained only through the working of the market process, how can it be set up as an independent criterion with which to evaluate the workings of the process itself? Even if this basic ques- tion is somehow finessed, justificatory arguments must be advanced in defense of the efficiency norm. In extension to politics and political process, can something akin to allocative efficiency be invoked at all? Or is a totally different success criterion appropriate here? If so, how is it to be defined? And, once defined, how can the two potential institutional failures Cato journal, Vol. 8, No. 1 (Spring/Summer 1988). Copyright 0 Cato Institute. All rights reserved. The author is General Director of the Center for Study of Public Choice at George Mason University. He thanks Robert Tollison, Gordon Tullock, and, especially, Viktor Vanberg for helpful comments on an earlier draft. This paper was first presented at the CIVITAS conference in Herdecke, West Germany, October 1986, and was subse- quently published in Individual Liberty and Democratic Decision-Making: The Ethics, Economics, and Politics of Democracy (pp. 41-52), edited by Peter Koslowski (1987). Permission from the publisher, J.C.B. Mohr (Paul Siebeck), to reprint the paper, with minor editing, is gratefully acknowledged. 1

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