Inducing Market-Failure
By Kevin
I must agree with Don Boudreaux. From my perspective the most critical economic function of a government is not its ability to correct externalities and market-failures, but its ability to induce them. The institutions that governments maintain can either sustain and enrich or feed off and combat economic activity.
As a result of geographical monopoly and historical accident, a range of governmental forms--and resulting economies--can be found. After a cursory analysis, it becomes absurdly clear that the power to induce and sustain market failure is most often found in the poorest countries.
I could be pursuaded otherwise, but I hold fast because of two charts that Don asked me to quickly assemble a few months ago--plotting Economic Freedom and Freedom to Trade vs. GNI per capita:
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