The market failure ideology Björn Hasselgren, PhD

GPMS 2013 Gothenburg November 20, 2014

Standard model of public and private goods

Market failure?

Market failure?

Government

failure?

Government

failure?

The rise of markets and the ”tax state”

(Schumpeter, 1918)

Autocracies

Govern-

ment

Markets

Study

object

Private and public squares

(Wagner, 1997/2007)

- Private ownership - Collective ownership

- Voluntary - Coercive

- User financing - Tax financing

- Agreement - Regulation

Private

square

Public square

How do we perceive the society?

The entangled reality

(Wagner)

Private

square

Public square

Cooperation and polycentrism is the normal pattern

What happens in-between the dichotomy’s categories is

important and should be better understood

Self-sustaining process of government

interventionism – a ‘market failure stance’

Large scale systems, distributive policies

and/or perceived monopoly tendencies

Regulation/

Nationalization

MC-pricing or tax financing

Government subsidies and high

taxes = high share of public servants in the

electorate

Market failure talk is persistent - why?

- High taxes a sign of market failure ideology

- Market failure talk gives a simple model for analysis

- Market failure ideology is self sustaining

- Interest groups protect and support market failure ideology

What to do?

- Analyze and understand the presence and origin of market

failure ideology

- Better understanding of the entangled reality and the

public-private cooperation is important

- Make a distinction between politics and production of

services and good

Björn Hasselgren, PhD

KTH Royal Institute of Technology

+46-70-762 33 16

bjorn.hasselgren@abe.kth.se

www.kth.se/blogs/hasselgren

@HasselgrenB