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by Neville Kennard, veteran preaching and practising capitalist

I have never been a bureaucrat or a politician. But when I occasionally engage with such people and they learn that I am a preaching and practising capitalist, it does not take long for the question of the Producers v. the Plunderers, the Tax Producers v. the Tax Consumers, to arise.

Invariably, the expression “Market Failure” is uttered.

We will come to just what is this apparent “Market Failure”, but first let me state that bureaucrats and politicians need this concept of “Market Failure”. At some level bureaucrats and other Tax Consumers know they produce nothing, that they are parasites. And this is not something they can be proud of. Among themselves they need to justify their existence and to propagate the idea of Market Failure to which they can ride to the rescue and become useful members of society.

And so the Market Failure expression is born and voiced. It is absolutely necessary for this idea to take hold and be acted on. The bigger the Market Failure and the bigger the Crisis, the better. “A crisis! How wonderful!”

“A major Market Failure — just what we need!”

So what is it this “Market Failure”? Do markets fail?

If a grocer runs out of milk a couple of hours before closing, this could be called “market failure”. Or if the grocer has too much milk and has to discard some, this too could be called another “market failure”. Of course it is quickly corrected, as the grocer learns to monitor his supply and demand more closely. Imagine if the government stepped in and created a “Milk Supply Authority” to ensure there is no more such “market failure”. Of course this would be absurd, and even most bureaucrats and politicians would realise this.

But if it is a “Major Market Failure”, such as the recent global financial crisis, this is too big a Crisis to be passed up and allow the market to correct. And it is too immediate to go looking for causes, to back up and look for a possible previous intervention that may have caused this unintended consequence. Especially when Intervention is piled on Intervention, as was the case with the GFC, and each Intervention was shrouded in economic mystique or political need, enacted by Parliaments and Congresses after being recommended by bureaucrats. Then, what could be better than a huge and threatening Crisis, of Market Failure, of “the Capitalist System needing Regulation”?

Markets, if left alone, correct quickly. Capitalists, if allowed to laissez-nous faire, will quickly find solutions. But the bureaucrats and politicians won’t waste a good crisis. They put themselves to work to create Programs, Ministers, Departments and Regulations to prevent any future Market Failures — they hope.

Unfortunately it seems to be almost never asked whether the apparent Market Failure was an Unintended Consequence of a previous Regulation and Intervention — which it almost always is. The causes of the recent Global Financial Crisis can be traced back years, decades perhaps, to interventions themselves intended to correct some perceived economic or societal issue that politicians sought to change.

Sometimes the Unintended Consequence of an intervention can be obvious. For example, Minimum Wage Laws create unemployment. Sometimes the consequences are less obvious, and further reaching. Minimum Wage Laws causes unemployment, which calls for unemployment benefits, which calls for more bureaucrats to administer, which calls for more taxes, which causes higher costs for producers, which can cause further unemployment. And so it goes.

A wily bureaucrat will conveniently label all of these Unintended Consequences “Market Failure” and seek a further intervention, a bigger budget and more staff.

All Interventions have Unintended Consequences, which can be labelled Market Failure. How very convenient!

(in order of appearance on Economics.org.au)
  1. Welcome from Neville Kennard
  2. Think Tanks Don't Work
  3. "Market Failure": Just what the government ordered!
  4. The Tragedy of the Tax Pool Commons
  5. Corporate Welfare
  6. Citizenship for Sale?
  7. I Don't Vote
  8. Voting: Right or Privilege?
  9. Stockholm Syndrome and our Love-Hate Relationship with Government
  10. Civil Disobedience: The Rules of Engagement
  11. Should Respect for Law Extend to Bad Laws?
  12. Jaywalking as a Demonstration of Individuality
  13. Government Likes War
  14. Collusion is Our Right
  15. Why Not the Drug Olympics?
  16. Unconventional Wisdom
  17. Tiger Farming: An Alternative to Extinction
  18. Looking Backwards: Mont Pelerin Society Conference, Sydney, 2010
  19. Tax Avoidance is a Patriotic Duty
  20. Kennard Writes to IPA Review Editor
  21. Genocide by Welfare: A Tragedy from the Aboriginal Welfare Industry
  22. Separating Sport and State
  23. Your Home is Not an Investment
  24. Dick Smith, Celebrity Philanthropist
  25. A Libertarian's New Year's Resolution
  26. Extend Politicians' Holidays to Create Prosperity
  27. Entrepreneurs are Disruptive, and Bureaucrats Hate It
  28. What is a good Australian?
  29. Governments Like Employment But Hate Employers
  30. The Market Failure Industry
  31. Neville Kennard: The Tax Avoidance Imperative
  32. Wot if ...?
  33. The Tribal Chief and the Witch Doctor
  34. The Tannehills
  35. Democracy versus Property Rights and Prosperity
  36. Government Doesn't Work, and That's the Way They Like It
  37. Minarchy vs Anarchy
  38. Euthanasia and Self-Ownership
  39. The Right Policies to Fix a Depression
  40. Is Howard Our Best PM?
  41. Tax Producers vs Tax Consumers
  42. Where There's a Queue, There's a Business Opportunity
  43. Authoritarian Freedom
  44. Why Classical Liberals Should Debate Anarchocapitalists
  45. The Tyranny of the Majority
  46. If you could choose to whom you paid your tax
  47. Business Should Exploit Boat People
  48. The Immorality of Trade Unions
  49. "America" vs "The United States"
  50. Sweet Anarchy
  51. The Illusion of "Job Creation"
  52. Gold Is Money
  53. Guilty Capitalists
  54. Bureauphobia
  55. Prosperity vs Growth
  56. Capitalism vs Democracy
  57. More people = More fun
  58. Self-Ownership - the very idea!
  59. Government will murder Neville Kennard if he doesn't back away
  60. The Australian Dollar Has Been Cowardly and Criminally Devalued, Harming the Poor Particularly
  61. Is Taxation Theft and Government a Tax Cheat?
  62. My Journey to Anarchy:
    From political and economic agnostic to anarchocapitalist
  63. Government Needs Bad Guys –
    that's why they like wars
  64. What Is Obscene?
  65. Traffic Economics
  66. Wayne Swan stands on the shoulders of other intellectual pygmies
  67. Neville Kennard Obituary
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