The debate over government intervention in the economy spans various perspectives. The Austrian view stresses the importance of information, arguing that government lacks the necessary data without market prices. Public choice theory builds on this, emphasizing both information and incentive issues, concluding that government intervention may not outperform markets. The Cambridge Welfare School acknowledges the information challenge posed by Mises, proposing continuous experimentation by governments to guide economic policies. The equilibrium school questions whether markets can achieve coherence, with advocates like Oscar Lange suggesting that governments should engage in experimentation akin to market 'groping' to improve outcomes. While the Austrian critique of government lacks information holds weight, the Cambridge economists advocate for active government experimentation despite recognizing both information and incentive challenges.
Economics students are often taught that government should intervene when there is market failure. But what about government failure? Should we expect government intervention to outperform market outcomes? Listen as Duke University economist Michael Munger explores the history of how economists have thought about this dilemma and possible ways to find a third or even fourth option beyond government or markets.