Negative externalities of government
DOI:
https://doi.org/10.52195/pm.v7i1.285Abstract
The neoclassical economists have long used the concept of «market failure» as a stick with which to beat up on the free enterprise system. Foremost amongst these so called «market failures» are «negative externalities.» These are defined as action that negatively affects third parties, other than via price. The key example is pollution. These dismal scientists never mention, however, the fact that government itself is the source of negative externalities itself, particularly through the socialization of risk; e.g., social security, Medicare, Medicaid and other forms of socialized medicine, unemployment insurance, welfare, etc. The present paper is devoted to explicating and elaborating upon the concept of government failure.
Key words: Externality, public good, market failure, neighborhood effect, government failure, moral hazard.
JEL Classification: Q5; D62; H41.
Resumen: Los economistas neoclásicos han utilizado durante mucho tiempo el concepto de «fallo de mercado» como un bastón con el que golpear sobre el sistema de libre empresa. Principalmente entre los llamados «fallos de mercado» se encuentran las «externalidades negativas». Estas se definen como acciones que afectan negativamente a terceras partes por vías distintas a los precios. El ejemplo clave es la polución. Sin embargo, estos «tristes» científicos nunca mencionan el hecho de que el propio gobierno es la fuente de las propias externalidades negativas, particularmente a través de la socialización del riesgo; por ejemplo, la seguridad social, los seguros médicos estatales, los seguros de enfermedad, los seguros de desempleo, la asistencia social, etc. El presente trabajo se dedica a explicar y ampliar el concepto de fallo del gobierno.
Palabras clave: Externalidad, bien público, fallo de mercado, efecto de vecindario, fallo del gobierno, riesgo moral.
Clasificación JEL: Q5; D62; H41.
References
ADIE, D.K. (1988): Monopoly Mail: Privatizing the United States Postal Service, New Brunswick, N.J.: Transaction.
—(1990a): «Why Marginal Reform of the U.S. Postal Service Won’t Succeed», in Free the Mail: Ending the Postal Monopoly, Peter J. Ferrara, ed., Washington, D.C.: The Cato Institute.
—(1990b): The Mail Monopoly: Analyzing Canadian Postal Service, Vancouver: The Fraser Institute.
ALSTON, W.D. (2007): «What Would Happen If the Post Office Had Competition?» June 6; http://www.lewrockwell.com/alston/alston21.html
ANDERSON, G.M. (1987): «Welfare Programs in the Rent Seeking Society», Southern Economic Journal, 54: 377-386.
ANDERSON, G.M. and BLOCK, W. (1993): «Guaranteed Annual Unemployment: a comment on Derek Hum and Wayne Simpson», The Journal of Labor Economics, Vol. 11, N.º 1, Part 2, January, pp. S348-S363.
ANDERSON, M. (1978a). Welfare: The Political Economy of Welfare Reform in the United States, Stanford: Hoover Institution.
—(1978b): The Voluntary Military, Stanford: Hoover Institution.
ANDERSON, W. (1998): «Market Failure?» October 8; http://www.mises.org/story/53
ARMENTANO, D.T. (1999): «Abolish Jury Duty», The Free Market. Vol. 17, N.º 8, August; http://www.mises.org/freemarket_detail.asp?control=14&sortorder=articledate
BARNETT II, W. (1989): «Subjective Cost Revisited», Review of Austrian Economics, Vol. 3, pp. 137-138.
BATOR, F.M. (1958): «The anatomy of market failure», Quarterly Journal of Economics 72 (August): 351-79.
BLOCK, W. (1980): «Congestion and Road Pricing», The Journal of Libertarian Studies: An Interdisciplinary Review, Vol. IV, N.º 3, Summer, pp. 299-330.
—(1983): «Public Goods and Externalities: The Case of Roads», The Journal of Libertarian Studies: An Interdisciplinary Review, Vol. VII, N.º 1, Spring, pp. 1-34; http://www.mises.org/journals/jls/7_1/7_1_1.pdf
—(1992): «Discrimination: An Interdisciplinary Analysis», The Journal of Business Ethics, Vol. 11, pp. 241-254. (14).
—(1993): «Worker’s compensation and unemployment insurance in the U.S. and Canada: a comment on John Burton and Terry Thomason, Chris Bruce and Frank Atkins, Patricia M. Anderson and Bruce Meyer, David Green and Craig Riddell», The Journal of Labor Economics, Vol. 11, N.º 1, Part 2, January, pp. S305-S326.
—(1998a): «Compromising the Uncompromisable: Discrimi-nation», American Journal of Economics and Sociology, Vol. 57, N.º 2, April, 1998, pp. 223-237. http://www.babson.edu/ajes/issues/past.htm
—(1998b): «Private Roads, Competition, Automobile Insurance and Price Controls», Competitiveness Review, Vol. 8, N.º 1, pp. 55-64.
—(2001): «Motor Vehicle Bureau», September 12; http://www.lewrockwell.com/block/block8.html
—(2003a): «Socialized Medicine is the Problem», Surgical Neurology, Vol. 60, N.º 5, November, pp. 467-46.
—(2003b): «National Defense and the Theory of Externalities, Public Goods and Clubs», The Myth of National Defense: Essays on the Theory and History of Security Production, Hoppe, Hans-Hermann, ed., Auburn: Mises Institute, pp. 301-334; http://www.mises.org/etexts/defensemyth.pdf
BLOCK, W. and WILLIAMS, W.E. (1981): «Male-Female Earnings Differentials: A Critical Reappraisal», The Journal of Labor Research, Vol. II, N.º 2, Fall, pp. 385-388.
BOUDREAUX, D. (1993): «A Life-Saving Lesson from Operation Desert Storm», The Freeman, October, Vol. 43, N.º 10; http://www.libertyhaven.com/politicsandcurrentevents/publicjustice/lifesaving.shtml
BRENNAN, G. and BUCHANAN, J.M. (1985): The reason of rules: constitutional political economy, Cambridge: Cambridge University Press.
BRESIGER, G. (2004): «Post Office Hell», December, 22; http://www.mises.org/fullstory.aspx?Id=1696
BROWN, A. (1987): «The Shadow Side of Affluence: The Welfare System and the Welfare of the Needy,» Fraser Forum, October.
BUCHANAN, J.M. (1969): Cost and Choice: An Inquiry into Economic Theory, Chicago: Markham.
—(1975): The Limits of Liberty: Between Anarchy and Leviathan, Chicago: University of Chicago Press.
BUCHANAN, J.M. and THIRLBY, G.F. (1981): L.S.E. Essays on Cost, New York: New York University Press.
BUTLER, S.M. (1986): «Privatizing Bulk Mail», Management, 6, N.º 1.
CALLAHAN, G. (2000): «Market Failure Again?» April 4; http://www.mises.org/story/407
Canterbury, E.R. and MARVASTI, A. (1992): «The Coase Theorem as a Negative Externality», Journal of Economic Issues, Vol. 26, N.º 4, December, pp. 1179-1189.
CAPLAN, B. (2007): The Myth of the Rational Voter: Why Democracies Choose Bad Policies. Princeton, N.J.: Princeton University Press.
CORDATO, R.E. (1989): «Subjective Value, Time Passage, and the Economics of Harmful Effects», Hamline Law Review, Vol. 12, N.º 2, Spring, pp. 229-244.
—(1992): Welfare Economics and Externalities in an Open-Ended Universe: A Modern Austrian Perspective, Boston: Kluwer.
CORNES, R. and SANDLER, T. (1986): The Theory of Externalities, Public Goods and Club Goods, Cambridge: Cambridge University Press.
COWEN, T., ed. (1988): The Theory of Market Failure: A Critical Examination, Fairfax, VA: George Mason University Press.
NEGATIVE EXTERNALITIES OF GOVERNMENT 2 3 3
DILORENZO, Th.J. (1990): «The Subjectivist Roots of James Buchanan’s Economics», The Review of Austrian Economics, Vol. 4, 1990, pp. 180-195.
EPSTEIN, R.A. (1992): Forbidden Grounds: The Case Against Employment Discrimination Laws, Cambridge: Harvard University Press.
FERRARA, P.J. (1982): Social Security: Averting the Crisis, Washington DC: Cato Institute.
—(1985) ed.: Social Security: Prospects for Real Reform, Washington DC: Cato Institute.
FRIEDMAN, M. (1962): Capitalism and Freedom, Chicago: University of Chicago Press
—(1967): «Why Not a Volunteer Army?» New Individualist Review, Vol. 4, Spring, pp. 3-9
FRIEDMAN, M. and FRIEDMAN, R.D. (1998): Two Lucky People, Chicago: University of Chicago Press
GARRISON, R. (1985): «A Subjectivist Theory of a Capital Using Economy», in O’Driscoll, Gerald P. and Rizzo, Mario, The Economics of Time and Ignorance, Oxford: Basil Blackwell.
GOODMAN, J.C. and G.L. Musgrave (1992): Patient Power: Solving America’s Health Care Crisis. Washington D.C.: Cato.
GRUBER, J. and WISE, D.A. , eds. (1999): Social Security and Retirement Around the World, University of Chicago Press.
GUILLORY, G. (2005): «What Are You Calling Failure?» May 5; http://www.mises.org/story/1806.
GUNNING, J.P. (1990): The New Subjectivist Revolution: An Elucidation and Extension of Ludwig von Mises’s Contribution to Economic Theory, Savage, MD: Rowan and Littlefield.
HAMOWY, R. (1984): Canadian Medicine: A Study in Restricted Entry, Vancouver: The Fraser Institute.
HERBENER, J. (1996): «Socialized Medicine, Take Two», The Free Market. Vol. 14, N.º 7, July; http://www.mises.org/freemarket_detail.asp?control=172&sortorder=articledate HIGGS, R. (1995): «The Myth of “Failed” Policies», The Free Market. June. Vol. 13, N.º 6. http://www.mises.org/freemarket_detail.asp?control=239&sortorder=articledate
HOLCOMBE, R.G. (1994): The Economic Foundations of Government, New York: New York University Press.
WILLIAM BARNETT II, WALTER BLOCK Y JERRY DAUTERIVE
HOPPE, H.H. (1999): «The private production of defense», Journal of Libertarian Studies 14, N.º 1 (Winter): 27-52.
—(1993): «A Four-Step Health-Care Solution», The Free Market. Vol. 11, N.º 4, April, pp. ; http://www.mises.org/freemarket_detail.asp?control=279.
—(2006): «Uncertainty and Its Exigencies: The Critical Role of Insurance in the Free Market», March 7; http://www.mises.org/story/2021
—(2003) ed.: «National Defense and the Theory of Exter-nalities, Public Goods and Clubs», The Myth of National Defense: Essays on the Theory and History of Security Production, Hoppe, Hans-Hermann, ed., Auburn: Mises Institute.
HULSMANN, J.G. (2003): «Facts and Counterfactuals in Economic Law», The Journal of Libertarian Studies. Vol. 17, N.º 1, pp. 57-102.
HUMMEL, J.R. (1990): «National Goods Versus Public Goods: Defense, Disarmament, and Free Riders», 4 Rev. Austrian Econ. 88.
JOHNSON, C.; BLOCK, W. and OXNER, Th. (1998): «Notes on Health Care Financing and Free Markets», Journal of Accounting, Ethics and Public Policy, Vol. 1, N.º 3, Summer 1998, pp. 488-502.
JUURIKKALA, O. (2007a). «Old-age Security Without the State», http://www.mises.org/story/2515
—(2007b): «Making Kids Worthless: Social Security’s Con-tribution to the Fertility Crisis», January, 24; http://www.mises.org/story/2451
KIRZNER, I.M. (1963): «On the Premises of Growth Economics», New Individualist Review, Summer, Vol. 3, N.º 1, pp. 20-28.
—(1986) ed.: Subjectivism, Intelligibility and Economic Understanding, New York: New York University Press.
LABLETTA, N. and BLOCK, W. (1999): «The Restoration of the American Dream: A Case for Abolishing Welfare», Humanomics, Vol. 15, N.º 4, pp. 55-65.
LAYDEN, W.R. and BLOCK, W. (1996): «Health Security», Nomos, July, N.º 47/48, pp. 38-45.
LEVIN, M. (1987): Feminism and Freedom, New York: Transaction Books.
MACKENZIE, D.W. (2002): «The Market Failure Myth», August 26; http://www.mises.org/fullstory.aspx?control=1035.
—(2007): «What If Social Security Were Completely Scrapped?» June 18; http://www.mises.org/story/2586.
MATTEI, E. (2004): «Employment at Will», April 28; http://www.mises.org/story/1502
MEDEMA, S.G. (2004): «Mill, Sidgwick, and the Evolution of the Theory of Market Failure», July; http://www.utilitarian.net/sidgwick/about/2004070102.pdf.
MISES, L. von (1944): Bureaucracy. New Haven: Yale University Press.
—(1952): Planning for Freedom and Other Essays and Addresses; South Holland, Ill.: Libertarian Press; http://www.mises.org/midroad.asp.
—(1981 [1969]), Socialism, Indianapolis: Liberty Fund
—([1949] 1998), Human Action, Scholars’ Edition. Auburn: Mises Institute.
MOORE, S. (1987): «Privatizing the U.S. Postal Service», in Stephen Moore and Stuart Butler, eds., Privatization, Washington: Heritage Foundation.
MOORE, Th.G. (1990): «The Federal Postal Monopoly: History, Rationale, and Future», Free The Mail: Ending the Postal Monopoly ed. Peter J. Ferrara.Washington, D.C.: CATO Institute.
MUELLER, D.C. (1996): Constitutional Democracy, Oxford: Oxford University Press.
MURPHY, R.P. (2005): «Bush’s Impossible Social Security Plan», June 12; http://www.mises.org/story/1813.
MURRAY, Ch. (1984): Losing Ground: American Social Policy from 1950 to 1980, New York: Basic Books.
NORTH, G. (1992): The Coase Theorem, Tyler, TX: The Institute for Christian Economics.
OI, W.Y. (1967a): «The Real Costs of a Volunteer Military», New Individualist Review, Vol. 4, Spring, pp. 13-16.
—(1967b): «The Economic Cost of the Draft», American Economic Review, Vol. 57, May, pp. 39-62.
OLASKY, M. (1992): The Tragedy of American Compassion, Chicago: Regnery Gateway.
OLSON, Jr., M. (1971): The Logic of Collective Action: Public Goods and the Theory of Groups, New York: Schocken Books.
OSTROWSKI, J. (2003): «What’s Wrong with Juries», December 1; http://www.mises.org/story/1383.
PIGOU, A.C. (1932 [1920]): The Economics of Welfare, 4th ed. London: Macmillan.
PRIEST, G. (1975): «The History of the Postal Monopoly in the United States», Journal of Law and Economics, Vol. 18, N.º 33, pp. 33-80.
REISMAN, G. (2005): «Social Security Reform: A Free-Market Alternative», February, 21; http://www.mises.org/story/1751.
RIZZO, M.J. (1979): «Uncertainty, Subjectivity, and the Economic Analysis of Law», in Mario J. Rizzo (ed.), Time, Uncertainty, and Disequilibrium, Lexington, MA: Lexington Books, pp. 71-90.
—(1980): «The Mirage of Efficiency», Hofstra Law Review, Vol. 8, pp. 641-658.
ROBBINS, J.Ch. (2000): «The Post Office and E-Commerce», September 15; http://www.mises.org/story/506.
ROBERTS, T. (2005): «Postal Commissars to Raise Rates. Don’t Complain», May 2; http://www.mises.org/story/1812.
ROCKWELL, Jr., Ll.H. (2002): «Can the Market Deliver Letters?» December 17; http://www.mises.org/story/1119.
—(2003): «Discrimination and Freedom», The Free Market. Vol. 21, N.º 4, April; http://www.mises.org/freemarket_detail.asp?control=437&sortorder=articledate
—(2004): «Save or else», December 12; http://www.mises.org/fullstory.aspx?Id=1695
ROTHBARD, M.N. (1967): «Abolish Slavery: Compulsory Jury Duty Also Is Draft», Orange County Register, August 3.
—(1978): For a New Liberty, New York: Macmillan.
—(1979): «Comment: The Myth of Efficiency», in Mario J. Rizzo (ed.), Time, Uncertainty, and Disequilibrium, Lexington, MA: Lexington Books: pp. 91-96.
—(1982): «Law, Property Rights, and Air Pollution», Cato Journal, Vol. 2, N.º 1, Spring; reprinted in Economics and the Environment: A Reconciliation, Walter Block, ed., Vancouver: The Fraser Institute, 1990, pp. 233-279; http://www.mises.org/rothbard/lawproperty.pdf
—(1985): «Airport Congestion: A Case of Market Failure?» The Free Market. Auburn, AL: The Ludwig von Mises Institute, January, http://www.mises.org/econsense/ch52.asp
—(1993): Man, Economy, and State, Auburn AL: Ludwig von Mises Institute.
—(1997a): «Toward a Reconstruction of Utility and Welfare Economics», in The Logic of Action: Method, Money and the Austrian School, Vol. I, Cheltenham, UK: Edward Elgar.
—(1997b): «The Fallacy of the “Public Sector”», The Logic of Action: Applications and Criticism from the Austrian School, Vol. II, Cheltenham, UK: Edward Elgar.
—1998 [1982]: «Welfare and the Welfare State», In The Ethics of Liberty, Atlantic Highlands, N.J.: Humanities Press, pp. 160-193; http://www.mises.org/rothbard/ethics/ethics.asp
ROUNDS, Jr., Ch.E. (2005): «The Fiction of Social Security Bonds», May, 30; http://www.mises.org/story/1820
SANDLER, T. (1992): Collective Action: Theory and Applications, Ann Arbor: The University of Michigan Press
SANTORIELLO, A. and BLOCK, W. (1996): «Externalities and the Environment», The Freeman, November, Vol. 46, N.º 11, pp. 755-756; reprinted in El Diario, (Bolivia), July 1997.
SEMMENS, J. (1995): «Privatizing Vehicle Registrations, Driver’s Licenses and Auto Insurance», Transportation Quarterly, Fall, Vol. 49, N.º 4, pp. 125-135.
SENNHOLZ, H. (2004): «Distractions in the Social Security Debate», http://www.mises.org/fullstory.aspx?Id=1686
SIMPSON, B. (2005): Markets Don’t Fail, New York, N.Y.: Lexington Books.
SOWELL, T. (1975): Race and Economics. New York: Longman.
SOWELL, Th. (1982): «Weber and Bakke and the presuppositions of “Affirmative Action”», Discrimination, Affirmative Action and Equal Opportunity, Walter Block and Michael Walker, eds., Vancouver: The Fraser Institute.
—(1994): Race and Culture: A World View. New York: Basic Book.
STEINREICH, D. (1996): «Social Security Reform: True and False», The Free Market. October, Vol. 14, Number 10; http://www.mises.org/freemarket_detail.asp?control=160&sortorder=articledate.
STRINGHAM, E. (2002): «The Emergence of the London Stock Exchange as a Self-Policing Club», Journal of Private Enterprise, Vol. 17, N.º 2, 1-19.
TERRELL, T. D. (2003): «Socialized Medicine in America», The Free Market. Vol. 23, N.º 11, November; http://www.mises.org/freemarket_detail.asp?control=458&sortorder=articledate TUCKER, W. (1984), «Black Family Agonistes», The American Spectator, July, pp. 14-17.
VANCE, L. (2005): «The Curse of the Withholding Tax», April 21; http://www.mises.org/story/1797.
—(2005): «The Fair Tax Fraud», May 18; http://www.mises.org/story/1814.
—(2006): «Flat Tax Folly», April 14; http://www.mises.org/story/2112.
WESTLEY, Ch. (2002): «The Myth of Market Failure», June 14; http://www.mises.org/story/982.
WILLIAMS, W. (1982b): «On Discrimination, Prejudice, Racial Income Differentials, and Affirmative Action», Discrimination, Affirmative Action and Equal Opportunity, Walter Block and Michael Walker, eds., Vancouver: The Fraser Institute.
WILLIAMS, W.E. (1982a). The State Against Blacks, New York, McGraw-Hill.
