Any policy, even if it is initially justified, inherently faces a half-life.

in interventionalism •  2 years ago 

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Fred Foldvary and Dan Klein's book chapter "The Half-Life of Policy Rationales" (from the book "The Half-Life of Policy Rationales" ed by Foldvary and Klein, NYU Press 2003) is an underappreciated article.

What I like about the article is it is a very simple Econ 101 story, but it completely turns the rationale for interventionism and market-correcting government policies on its head. The story is two-fold:

  1. new technology constantly comes about that reduces transaction costs, eliminating the standard argument for why markets fail. This is just the simple "middleman" story: where costs exist, so do profit opportunities for those who can overcome them.

  2. New technologies lead to new, more complex arraignments that disperse knowledge throughout the system, reducing the likelihood that any government intervention could be on net beneficial

Thus, the two main arguments for interventionism and planning are thrown into disarray: transaction costs are constantly falling due to incentives generated by their presence and the increased complexity of the system makes it harder to govern, not easier.

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