Should-Read: Noah Smith: Sometimes It’s Hard to Explain Market Failures

Should-Read: Noah Smith: Sometimes It’s Hard to Explain Market Failures:

I propose we minimize our use of the show-me-the-market-failure argument. Sometimes there are policies that people have tried in the past, which seem to work even though it’s hard to tell exactly why. Public education is a great example. It seems to make economies more prosperous, and most economists support it, but no one can point to just why the free market doesn’t educate enough people on its own. Road-building is another — there are essentially no countries with mostly private high-quality road systems, and economists struggle to explain why.

We know these government interventions work; figuring out why they work is a task for the future. Like the people who chewed tree bark to relieve pain long before the discovery of aspirin, or the engineers who used lithium-ion batteries without quite understanding the physics, sometimes it pays to go with evidence even before you have a theory in hand.