Suppression of the Market Isn’t Market Failure

(Don Boudreaux)

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Here’s a letter to the Atlantic: (For alerting me to this Atlantic essay I thank Gene Epstein.)

Editor:

Annie Lowrey’s description of the development and contents of UC-Berkeley economist Brad DeLong’s new book, Slouching Towards Utopia, makes me eager to crack it open (“The Economist Who Knows the Miracle Is Over,” September 3). But I’m puzzled by DeLong’s claim, as quoted by Lowrey, that “There’s someone in Bangladesh who would almost surely be a better economics professor than I am and is now behind a water buffalo. The market economy gives me and my preferences 200 times the voice and weight of his. If that isn’t the biggest market failure of all, I don’t know what your definition of market failure could possibly be.”

Say what?

Whatever is the best definition of market failure, surely it refers to correctible problems that arise either because of the operation of markets or because markets fail to operate despite being able to do so. Yet in Bangladesh markets are suppressed by a corrupt state and the absence of the rule of law. Because under such conditions markets can barely operate they cannot be said to fail.

Just today, the Fraser Institute released its 2022 Annual Report on Economic Freedom of the World. In this data- and detail-rich assessment of economic freedom in 165 countries, Bangladesh ranks near the bottom, at 139. It’s one of the least economically free countries on earth. The U.S., in contrast, ranks as the world’s seventh economically free country. Unlike in the U.S., property rights in Bangladesh are highly insecure, corruption is rampant, and contract enforcement is among the sorriest in the world – worse even than in Venezuela.

So, yes, tens of millions of Bangladeshis today are mired in poverty and without economic opportunity. But they are stuck in that sad condition not by the market’s failure but, instead, by the market’s absence.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030