Inequality 31, Economics, politics and forcing equality

A number of my friends have posted in facebook in agreement with this article from The Economist, "To be relevant, economists need to take politics into account." so I will post to contradict it. This article or its title is misleading if not wrong because: 

(1) It is saying that economists writing about plain economics are not relevant, so to make them relevant, they must write about economics + politics + sociology + anthropology + history + genderology + ...?

(2) Consider a simple demand-supply price equilibrium theory. A big storm damaged crops in a major food producing region that substantially supplies food in M.Manila, so the supply goes down, the price goes up since demand remains the same. No need for politics, history, anthro, sociology, gender, etc. to inject into the analysis to make it relevant.

Now comes politics, government imposes price control on food items supplied by other regions not affected by that big storm "to protect the poor." Things become awful, formal supply goes down, turns to "black market" supply. It is politics inserted into normal economic phenomena that distort things. And people think economists should always factor in politics, history, etc. in an otherwise simple situation. Lousy.

(3) Economists who comment on political issues -- politics around the world, political ramifications of federalism and parliamentarism, revamp of the constitution, etc. -- then they must insert politics, history, etc. in their analysis.

Consider this paper, "Economics versus Politics: Pitfalls of

Policy Advice" by Daron Acemoglu and James A. Robinson, Journal of Economic Perspectives—Volume 27, Number 2—Spring 2013. http://economics.mit.edu/files/10403

"Our argument is that economic policy should not just focus on removing market failures and correcting distortions but, particularly when it will affect the distribution of income and rents in society..." (last par. of the paper)

Can people, economists "remove market failures"? Wow. Only central planners would think that way. Consider these:

1. Mr. X and his friends demand a 500 GB USB that is sold for only P1,000. Demand is there but supply is zero, so market failure.

2. Mr. Y and his friends supply a rice variety that is said to cure 10 types of common diseases and sold at P800/kilo, no one buys their rice. Supply is there but demand is zero, so market failure.

Anyone, anytime and anywhere can create a market failure, as shown by 2 examples above. Some guys like economists (and politicians, etc.) think they can stop or remove that? Wow.

On inequality, it's part of nature, it's good. Otherwise people will work only few hours a day and demand that their pay, their house, healthcare, etc should be at least 1/5 that of the privileges enjoyed by Bill Gates and Henry Sy or John Gokongwei, etc. to have equality in society. The world has progressed because of respecting inequality, not forcing equality like socialist countries.

Now consider this drama by Oxfam and many other groups, institutions like the UN. https://www.oxfam.org/.../just-8-men-own-same-wealth-half...

Ok, the incomes and wealth of Bill Gates, Zuckerberg, etc. have expanded up to the troposphere, did they make people's lives, our lives, poorer and lousier? Do we have lousy and despicable lives because Zuckerberg got richer each year because of facebook?

No. On the contrary, we enjoy more comfortable, more convenient lives because of the inventions of these super rich people. If people think that Zuckerberg et al are creating a more despicable world because of their inventions and companies, they better opt out of fb, youtube, google, iphone, etc because everytime they use those things, they contribute to further enrichment of these super super rich people.

The world enjoys more comfort, more welfare because of the innovations made by these super-efficient, super-ambitious and super-rich people. Soon people will be working only 4 or 3 days a week and still get high pay because of rising productivity (and rising inequality) introduced by those super-efficient people. We should support the expansion of more super rich people instead of demonizing them. The politics of envy is only for the envious, like Oxfam and the UN :-)

The only way to stop rising inequality is via dictatorship. Put a gun on people's heads and tell them to stop being too innovative, too inventive, too revolutionary in business, to stop and limit excellence.

Central planners would clap this scenario. They get huge pay and various political perks doing all types of social engineering to force equality in the world.
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See also:

Inequality 28, IBON and sensational analysis, November 19, 2015

Inequality 29, More on Oxfam, squatters and a lamborghini

Inequality 30, Filipinos in Forbes' world billionaires, March 04, 2016

BWorld 42, World inequality, Oxfam and bad mathematics, February 11, 2016 

Market failure vs. Government failure, Part 6

An article today in BWorld says,  

"A market failure, in the parlance of economics, means a situation in which free markets produce wasteful outcomes."

The above statement is wrong on 2 counts: 

(1) Market failure is literal, demand is there but supply is low or zero, or vice versa. So failure of the market to adjust supply and demand. 

(2) Market failure is often a parlance of politics and government, less of economics. It is a good justification for endless government intervention and expansion for people who have no or little concept of "government failure."

Anybody can create a market failure anytime, anywhere. How?

1. Mr. X and his friends demand a 500 GB USB that is sold for only P1,000. Demand is there but supply is zero, so market failure.

2. Mr. Y and his friends supply a rice variety that is said to cure 10 types of common diseases and sold at P800/kilo, no one buys their rice. Supply is there but demand is zero, so market failure also.

Given these two examples of market failures, do they justify government intervention? Like (1) using taxpayers' money to create a new govt-owned IT company to supply that 500 GB USB and sell only at P1k or less. Or (2) Govt to procure that rice and distribute for free or at high subsidies to sick people?

No. In public finance econ (Econ 151), there is one definition there, something like "Market failure is a necessary but not sufficient condition for government intervention."

Rightly so. Because (1) market failures are generally short-term and are signals for market solutions in the short- to long-term, and (2) government intervention may only worsen the original market failure and introduce its own government failure.

From the same article, it says, "Public education... make economies more prosperous, and most economists support it, but no one can point to just why the free market doesn’t educate enough people on its own."

If people pay lots of taxes, fines, regulatory fees, mandatory social contributions, etc. to both national and local governments, there is little "disposable income" left for food, clothing, housing, gadgets, appliances, travel, etc. This explains why not many parents/guardians can send their kids to private schools, majority of parents send their kids to public education.

It's like the government disabling the people with some physical attacks then govt gives them a wheelchair and expects the people to be thankful to government for the wheelchair.

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See also: 
Market Failure vs. Government Failure, Part 3, June 23, 2010
Market Failure vs. Government Failure, Part 4, March 22, 2014 
Market Failure vs. Government Failure, Part 5, June 16, 2015

Market Failure vs. Government Failure, Part 5

* This is my guest article for suarakebebasan.org, a new website for freedom created by some Indonesian friends.
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Market Failure vs. Government Failure

Expert Column   Bienvenido Oplas Junior  | 15 Jun 2015

The main reason  why governments (local, national, regional/multilateral) around  the  world keep expanding is because they want to correct and address “market failure”, generally defined as the failure of the market players – firms and households – to supply certain goods and services at prices and  quantity that the public needs and demands.

While this is a generally accepted justification for government intervention, there is also  caution that “market failure” is only a necessary but not sufficient condition for such  intervention. There are two reasons for this.

One, market failure attracts market solutions (not government intervention) and such solutions may not be available today but will be available tomorrow. Good examples are mobile phones. Before, many poor people wanted to have their own phones but could not afford one. Today, prices of this commodity are affordable to the poor, including some of those cute, touch screen and  wifi-ready phones.

Two, it is highly probable that government will only exacerbate the problem and replace market failure with government failure. Good example is healthcare. There is widespread belief that governments should provide free or highly-subsidized healthcare to the poor, but systems are either too bureaucratic, or fast but wasteful and subject to corruption and robbery. And public dissatisfaction with government healthcare remains very high.

Sources of market failure

In economic theory, the two sources of market failure are identified. First,"public goods" character of a commodity or service. Once it is provided, it is difficult or impossible to exclude non-paying people from enjoying and free-riding the benefits of such good or service; or the cost of excluding the free-riders is high. Examples are national defense, traffic lights, peace and order and justice administration.

Second are "externalities", positive or negative. Examples of negative externalities are air, water and noise pollution, and examples of positive externalities are clean air and good peace and order situation.

With modern technology and management systems, various market solutions have been invented to deal with such perceived market failures. Examples are private villages, townships and industrial and economic zones. Almost everything that governments would normally provide are provided by the private sector there: roads and drainage, security, traffic lights, street lights, garbage collection, public parks, even schools and mini-hospitals. Thus, the “public goods” character of those services is not absolute. Their provision can be done entirely by the private sector, various market players and civil  society organizations.

The externalities aspect of those goods and services can also be internalized. Meaning the private sector players can internalize and absorb the full cost of providing such services, no government taxes and  fees are needed to finance them, partly of fully. These private villages and  ecozones have their  own systems of  internal revenue mobilization and local spending.

Sources of government failure

After identifying one "market failure" after another, governments began intervening in many sectors and sub-sectors of society. And the first source of failure is created: many bureaucracies. Government should be in healthcare, education, housing, roads, ports, credit, irrigation, trains, media, and so on. And many of those bureaucracies at the national government level are replicated at the state or provincial, city/municipality and barangay/village levels. Duplication, multiplication or missing of functions create wastes and distortions in society, not to  mention big opportunity for corruption in various levels of government.

A second source of failure has to be invented: more taxes, fees, fines, penalties, mandatory contributions, to finance the huge and  expansive bureaucracies. If one will check the World Bank’s “Doing Business” annual reports, as well as Price Waterhouse Coopers (PWC) “Paying Taxes” annual reports, one will see big number of taxes and fees, national and  local, that an average private enterprise will have to pay. Not included there are the costs of getting auditing, business compliance and law firms to help them understand and  comply with new and sometimes  overlapping requirements, permits and  fees to pay.

Since government administrators and officials are spending not their own money, the tendency and temptation to over-spend, to live beyond their means, is high. And huge public debts were invented. Almost all countries in the world now have public debts. While some have a debt/GDP ratio of only 20 percent or lower, many governments have debt/GDP ratio of 50, 80, 100, 200 percent or more.

The litany of reports and citizen complaints of government corruption, plunder and other forms of waste and crimes especially developing countries confirm that government failure is often worse than the market failure that such intervention wanted to correct.

Many people who demand more government intervention forget that aside from more taxes, fees and charges; huge and extensive bureaucracies also mean more regulations, inspections, registrations, accreditations, permits and licenses.

It is now difficult to identify any sector or industry and sub-industries in our social and economic lives where there is no government intervention and registration required. In many cities and countries, ven repairing or remodeling one’s office or condo requires city hall permit or license. And to reoccupy said office after a remodeling would require another city hall permit.

Those in the "informal" or "underground" economy do not exactly escape 100 percent of  those government permits and licenses. It is more like out of 10 or 20 business registrations, taxes and fees required by government, they only managed to escape perhaps 50-70 percent of them.

Good governance can cure government failure?

Very often, government failure is addressed or “corrected” by another set of government intervention. Like creating a new anti-corruption office or task force, creating new internal regulations and mechanisms to check and double check procedures and release of funds. These moves are essentially pouring more public money to determine how much public money have been stolen and wasted already.

The new key word being sold to the public to accept new interventions is "good governance", more transparency and accountability of public institutions and government officials and personnel. Implied in this formulation of course is the retention of a big, expansive, and interventionist bureaucracy; only to expect them to behave more transparently.

An option to go "back to the market" and "less government intervention" is far out among the minds and demands of many groups and people, even from those very vocal sectors and individuals that regularly note government failure, like those in media, the academe, NGOs and civil society groups.

Anyone anywhere can create a “market failure”. If people demand a USB with 20 GB memory and sold for only US$10, they create a market failure.  Demand is there but supply is zero. The price these people are willing to pay is too low compared to what producers are willing to sell. Or a biotech firm supplies a particular rice variety with several nutritional values but sold at $10 per kilo and no one buys it, also creates  a market failure. Supply is there but demand is zero, market failure.

Rent seeking

In the book, "Government Failure: A Primer in Public Choice" written by Tullock, Seldon and Brady (2002, published by Cato Institute, Washington DC), Chapter 4 is entitled “The cost of rent-seeking”. Examples of rent-seeking are (a) trade protectionism, where the protected local industry benefits but the local consumers are worse off; (b) private monopolies, and (c) direct income transfers by government where A is taxed and B receives the money.

Trade protectionism is trade dictatorship. The domestic consumers are being told that they can only buy or import from this country but not from other countries; or they can buy from anywhere but only for xx tons volume; or they can buy anywhere at any amount but at 10 percent, or 100 or 500 percent more expensive price because of import tariff and  other national and local taxes and fees.

Private monopolies via government franchising is enterprise dictatorship. The public, the consumers are told that they can only purchase a particular product or service from a single company.

Direct income transfers are political cronyism and nepotism. Very often the targeted beneficiaries are old political supporters, relatives and clan members of the  politicians  and officials in charge of money transfer, in cash or in kind.

Voluntary Exchange vs. Forced Exchange

In voluntary exchange, producers come or attract consumers to sell their products or services like fruits, fish, beer, hair cut, tutorial, cell phone repair and so on. Consumers choose from various producers who offer the same or  similar goods and services, and chose those who offer them good value for their money.

No one is coerced or arm-twisted to surrender his/her money to someone else. Only when the consumer is satisfied with  the product or  service will  he/she give the money to the product seller.

In forced exchange, people are coerced to surrender their money to a big and armed body or institution. Their monthly salaries are automatically deducted of a certain percentage; their earnings in bank deposits, stocks and commodity markets, are automatically withheld of a certain percentage. When they buy or purchase something like hamburger, the price they pay is higher because of taxes and surcharges imposed on the original price of those services and commodities.

And even if the people do not like the personnel and officers assigned to help them because they are arrogant or lazy or corrupt, their taxes and fees will be used to sustain these people.  Or if people feel that certain services being offered and already budgeted are unnecessary, there is little choice to stop them. Lazy and arrogant government personnel can be kicked out of office, true, but one must set aside substantial time and effort, and money of course, to take short leaves from work and stand up as witness to usually long court procedures.

Market, state and civil society

Markets and trade were invented to fulfill certain human demands for survival and modernization. Fishermen who have surplus fish catch need wood, nails and carpentry tools to build their house. They also need a boat, fuel and fishing gears and equipment. People specialize in doing a particular skill and they can have many things  they want through trade.

Government and the state was invented mainly to help enforce agreements and contracts among people, to have rule of law. Before people will stab or shoot each other over disputes in contracts, verbal or written, misunderstandings and disputes are settled in peaceful and transparent way and the penalties for violators are also made transparent.

Civil society was invented to help address certain government failures. As government deviates from its basic function of promulgating the, rule of law – the law applies equally to unequal people, no one is exempted and no one can grant an exemption – it creates one government failure after another. Civil society is non-state, non-government entities that help people to have mature, responsible and voluntary assistance to other people. The idea of being shamed among peers and neighbors is sometimes a worse punishment than government prison and incarceration.

It is important that individuals should assert their personal freedom, their right to voluntary exchange, and oppose an ever-widening system of forced exchange and government intervention. This is not a call for zero government. Government has an important but limited function in our lives. Its expansion to so many sectors and facets of our lives however, is not only dangerous, but has already wreaked havoc to our lives. The task of asserting our individual liberty is a continuing challenge for all of us.

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Alasan utama mengapa pemerintah (lokal, nasional, regional atau multilateral) di seluruh dunia terus berkembang adalah karena mereka ingin mengoreksi dan memperbaiki "kegagalan pasar", yang secara umum didefinisikan sebagai kegagalan pelaku pasar - perusahaan dan rumah tangga - untuk memasok barang-barang tertentu dan jasa dengan harga dan kuantitas sesuai kebutuhan masyarakat dan permintaan.

Meskipun alasan tidak bekerjanya pasar adalah pembenaran yang berlaku umum untuk intervensi pemerintah, ada juga mengingatkan bahwa “kegagalan pasar" hanya kondisi yang perlu (necessary), tetapi bukan kondisi yang cukup (sufficient) untuk intervensi tersebut. Ada dua alasan untuk ini….

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See also: 
Market Failure vs. Government Failure, June 07, 2006 
Market Failure vs. Government Failure, Part 2, March 03, 2008
Market Failure vs. Government Failure, Part 3, June 23, 2010
Market Failure vs. Government Failure, Part 4, March 22, 2014

Market segmentation and pricing, October 09, 2007
Limits to Free Market?, November 16, 2007 
Are Markets Moral?, January 05, 2014

Market Failure vs. Government Failure, Part 4

Market failure can be created by everyone and anyone in this planet, anytime and anywhere. For instance, person A will demand a USB/flash disk with 100 GB memory sold for only P300. Person B may demand for the same product for only P400 (their “willingness to pay”) and so on. There is a demand for that product. Where is the supply? Zero at those prices. There is no market clearing price as its current price could be several thousand pesos now. Market failure.

Person C has invented through biotechnology a tilapia variety that can grow to commercial size within a few weeks and selling the fingerlings at P50 each. No one buys as the price is deemed too high. There is supply for a particular product but demand is zero. Another market failure.

In both cases of market failures, should government intervene as often advocated by many sectors, that government should come in anytime anywhere where there are clear market failures?

Nope. There are millions of unmet demand  every day in this planet. And conversely, there are also millions of unmet supply every day in the planet. It is simply impossible both for technical and fiscal/financial considerations for government to come in for each of those market failures. Market solution to market failures can occur within the day or within a year or within a decade or century. Where there used to be market failure several years ago, there is market solution by now, or next month.

An economist friend, Prof. Nandy Aldaba of Ateneo Economics Department, noted that

The Philippines has P 1,025 Billion for all the Departments. We want job generation for inclusive growth and the Departments in charge are the poorest: NEDA, 5 Billion and DTI, 2.8 Billion…  DA has a very big budget - 63.7 Billion but with all the corruption in this agency, nothing much has happened to our agricultural sector. 

I commented that we do not want government as currently the biggest employer to become “biggest-est” employer. Nandy agreed and added that even in mainstream economics, market failures such as coordination failure and externalities need government intervention, and would  require sufficient resources.

He is right, and in mainstream economics, it also says that market failure is only a necessary but not sufficient condition for government intervention. Because frequent intervention often introduces government failures, solutions that can be worse than the problems they intend to solve. Whereas market failure invites market solution.

The single biggest job that government can do to encourage more private sector and civil society employment, plus self-employment, is to have strong rule of law system in the country. Contracts should be respected and enforced and people will have long term faith in the economy.

This is not to say that "we abandon all government interventions." No, no, only anarchists would say that. Having rule of law, like impartial and credible courts, police and justice system, stable policies, is one important form of government intervention that must be pursued.

It is important that people should recognize that frequent government intervention to correct any perceived market failure is counter productive. Very often, it would help if government will intervene less, regulate less, in addressing certain market failures, real or imaginary. Regardless of the people or personalities in government that we put in.

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See also: 
Evolution of Market and State, October 25, 2005
Market Failure vs. Government Failure, June 07, 2006 
Market Failure vs. Government Failure, Part 2, March 03, 2008
Market Failure vs. Government Failure, Part 3, June 23, 2010

Market segmentation and pricing, October 09, 2007
Limits to Free Market?, November 16, 2007 
Pol. Ideology 10: Joe Stiglitz and the Market, December 16, 2008
The Pope and Capitalism, December 03, 2013
Are Markets Moral?, January 05, 2014

PhilHealth Watch 3: Market failure vs. Government failure in health insurance

When my wife gave birth to our 2nd child early last week, I needed to get her member data record (MDR) as one of the requirements for PhilHealth claims/deductions. I went to PhilHealth Quirino Ave. office to get it. The printing of that document should not take more than 1 minute, I guess.

But the long lines just to get that MDR -- as shown in this photo -- was que horror! About 30+ people queuing to get an MDR or PhilHealth ID and only 1 PhilHealth staff to entertain them all. It took me 1:40 hours just to get that simple document.

Does PhilHealth think that their members are jobless people who have nothing else to do and hence, can endure queueing for hours just to get simple documents, or file claims? I filed a claim, again for my wife who was hospitalized about 3 months ago. Just to file the claim took me 2:05 hours. Then we will have to wait at least 60 working days (roughly 2 1/2 months) to get the claims.

While people endure the slowness of PhilHealth bureaucracy when their members get their rightful claims after religiously paying their mandatory monthly contributions for years, there is a poster inside, shown in this photo, that members can send in their contribution by texting. When you send your contribution, PhilHealth wants to get it within seconds or minutes. When you get your claims, PhilHealth wants you to wait for hours queuing, and several months waiting for the actual claims.

Now we are resigned to the fact that PhilHealth's universal coverage will become even bigger and bigger, fine. The poor deserves healthcare. But do we all pay bigger mandatory monthly contributions then? Do we all endure even longer queues and longer waiting period to get Philhealth benefits?

The future is not yet here but my guess is that the answer to my own questions above are all Yes. Endure more ugly government bureaucracies.
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On March 25, 2009, I wrote this:

Health Insurance and Markets

Yesterday afternoon, I attended a round-table discussion by the "Ayos na Gamot sa Abot-Kayang Presyo" (AGAP), or Good ,medicines at affordable price. While I did not share with AGAP its position on the "cheaper medicines law", some leaders of AGAP are my friends as we belong to a new big coalition of NGOs on health transparency in the Philippines(to be formally launched in the next few days). That's why I was among those invited to attend the round-table discussion.

The topic was about health insurance in the Philippines and the main presenters were officials from the state-owned Philippine Health Insurance Corporation (PhilHealth), as well as a staff of a Congresswoman who authored a bill revising the law on PhilHealth. Other participants were mostly health NGOs affiliated with AGAP.

The PhilHealth guys presented and made further elaboration during the earlier part of the open forum. I have to raise my hand to make several points.

1. Our main concern is expanding access by more people to quality health care, or access to quality food, quality clothes, quality cellphone, etc. The problem has been identified and the solution is either more government intervention and subsidies, or less government intervention. Most of the concerns and sentiments are for the former.

2. But think of this: there is no government food insurance corporation -- all restaurants, all fastfood chains, all carinderias and street food vendors, are private, there is no government restaurant or government carinderia, and people are eating. There is no government transportation insurance corporation -- all buses, taxis, jeepneys, tricycles, airlines, shipping lines, etc. are private, and people are moving. There is no government clothing insurance corporation -- all clothes, pants, shoes, etc. are privately manufactured and distributed, and people have various clothing and footwear.

3. In education and health care, there is heavy government presence and intervention, and that's where problems and scandals come -- the Department of Education (DepEd) is among the most corrupt agencies in the government as perceived by many people, PhilHealth was used during the 2004 elections where millions of non-contributing people were given health cards, there are many reports of stealing and padding of claims by some hospitals, physicians and members amounting to huge amount of money.

4. Even if the staff and personnel of PhilHealth are good people and angels, but if the President and/or top political leaders are corrupt, the institution will be corrupted and so indirectly, will be its staff. Why did the "membership" of PhilHealth jumped suddenly in 2004 and not in 2003 or 2005? Because of the 2004 Presidential elections. So we can expect the same pattern next year where there will be another Presidential elections.

5. It is apparent therefore, that the solution lies in making the government step back, in reducing its intervention and allow the markets to come in a competitive environment. I am not saying that PhilHealth should be abolished or privatized, it can be shrank and become one of the many health insurance providers in the country. Membership in PhilHealth should also not be made made mandatory; it should be voluntary.

One reason why there is low formal business activities in the country, why there is high incidence of the informal sector, is because businesses have to pay plenty of mandatory taxes and contributions to the government: (1) BIR for monthly remittance of income tax, value added tax, other taxes; (2) SSS for monthly remittance of social security mandatory contributions; (3) Pag-IBIG for mandatory housing contributions, (4) PhilHealth for mandatory health insurance contribution, (5) local governments, (6) SEC, (7) DTI, etc. Government is a big burden for entrepreneurs, so that making health insurance voluntary and not mandatory will help reduce the burden in business and entrepreneurship. Also in the "cheaper medicines law", the government boasted of advancing this philosophy, yet government taxes and fees (national and local governments) comprise about 20 percent of the retail price of medicines, making said government pronouncements an irony if not a hypocrisy.

Oww, I could see some smiles and grumbles from the audience while I was talking. After I talked, some laughter. Maybe some were wondering, "which planet does that perspective come from?" :-)

More discussions and exchanges later, one PhilHealth official mentioned about "market failure" that is why government must come in to provide support to the poor and disadvantaged people. This I could not allow to pass, I rose my hands again and spoke for the second time.

There is market failure, true, but when there is stealing in government, that's "government failure". When the thieves in government do not go to prison and keep their positions instead, that's another "government failure". If those thieves will hire fellow crooks, thus perpetuating the system into large-scale, from top to bottom levels of corruption, that's another case of "government failure". There are many cases of government failures that we don't realize, we only hear "market failure".

Besides, there will always be market failure anytime, anywhere. If I demand a USB with 10 GB memory and sold for only P500 (nearly US$10), there is already market failure because while there is a demand (my personal demand), there is zero supply. So will government come in to produce that powerful but dirt-cheap USB? Another case, if there is a helicopter service from Quezon City to the Manila international airport for xxx thousand pesos and there are no takers or passengers, that again is market failure because while there is a supply of a service, there is zero demand. So will government come in to subsidize the fare in that helicopter service, in order to prevent the bankruptcy of the helicopter company?

There will always be market failure but it does not imply that government should come in all the time. Many if not most market failure does not need any government intervention because the market is capable of correcting itself (reduce or stop the supply of something if demand is small or zero, or vice versa).

In the case of health insurance, my idea is that people can have dual health insurance -- the one by government (PhilHealth) and a private health maintenance organization (HMO). The latter will be operating in a competitive environment and level playing field, so that each player will be forced to continuously improve their services. Allow also price segmentation, so that HMOs can charge P1,000 per year or P10,000 per year or P100,000 per year, depending on the budget and specific needs of their clients. Lower annual payment for fewer services, higher annual payment for plentiful and elaborate services.

This way, instances of claims-padding by the contributing members and/or physicians and hospitals can be minimized if not stopped because PhilHealth's coverage will be capped to a certain maximum. Whether patients will stay in a hospital for only 1 day or 1 week or 1 month, claims padding will be minimized. Whatever amount in excess of PhilHealth coverage can be sourced by the patients and their families to their HMOs or personal/household savings, or they can approach their local politicos for assistance. Price segmentation or price differentiation is a wonderful mechanism to allocate resources properly among people with different budget and different needs.

It was a great afternoon of exchanging ideas, but for me, it was an opportunity to douse some sense to heavy statist philosophy that more government intervention, taxation, regulation (and the corruption and waste that often come with such heavy intervention), is the solution to any social or economic problem.

Market Failure vs. Government Failure, Part 2

One big reason why there are so many instances or scandals of corruption and inefficiency in government is because there as so many opportunities for stealing and waste in so many agencies. And it has come to that situation because government has assumed or arrogated upon itself so many functions and responsibilities, many of which should have been personal and parental or corporate responsibilities in the first place. No thanks to many people who endlessly rant “market failure”, the “greedy nature of markets”, and “tendency for wide social inequity under markets” thinking.

Repeated attacks and distrust of the market is often bordering between ignorance and just evil desire to intervene in other people’s lives, like taking a big portion of people’s income and savings through various taxes and fees. The market is often equated with big corporations, like those engaged in the stock market and foreign exchange market. But market refers to all individuals, both consumers and producers. Even the economically dependent (children, physically or mentally disabled, old people) and the plain lazy and irresponsible people who don’t want to work, are part of the market. Because even if they earn no income, they consume (food, milk, medicines, alcohol, cigarettes, haircut, etc.) and that makes them part of the market for various goods and services in society.

“Market failure” has been abused to justify various forms of government intervention, regulation and taxation. And a number of people who enter the bloated government have seen opportunities for stealing and corruption. Some politicians run for public office, or bureaucrats beg to be appointed to high government positions, mainly to steal; or secure certain business favors that would not be available to them if they are out of government. Or perhaps just an ego-trip to show to other people how “intelligent” and how well-connected politically they are.

Those in government whose main intention is to steal can do it in various departments and their attached agencies or bureaus. Or there are several hundred government corporations, financial institutions, state universities, even constitutional bodies, to occupy where stealing or rent-seeking can be done. Or head certain regulatory agencies that decide who can do business and who cannot. All that one who leads any of those regulatory agencies do, is to make plenty of strict regulations, so that some of those who want to be allowed to do business quickly will be forced to pay bribes or grant certain economic and political favors. This largely explains the widespread existence of illegal gambling, illegal drugs, prostitution, and other services despite the fact that government prohibits all of them, at least in paper.

Those multiple and repeated instances of robbery, or small-scale wastes that happen a hundred or a thousand times elsewhere, already constitute ample proof of “government failure”. But instead of government withrawing from those sectors and services where abuses, red tape and corruption are repeatedly noted and reported, "government failure" is addressed by another set of government intervention, by instituting plenty of anti-corruption bodies and counter-check mechanisms and procedures. These moves are often pouring more public money to determine how much public money have been stolen and wasted already.

An option to go "back to the market" and "less government intervention" is far out among the minds and demands of many groups and people, even from those very vocal sectors and individuals that regularly note government failure, like those in media, the academe, NGOs and civil society groups.

There will always be market failure in all spheres of our lives as individuals and communities become more specialized, as tastes and preferences constantly change and evolve. For instance, Juan demands a rice variety that also boosts his and his family’s immunity against dengue and malaria because they live in a mosquito-infested neighborhood. But such rice variety does not exist yet, so this can be taken as “market failure” already. Or even assuming that such variety is already available but its price is too expensive for Juan and his family, other people will again call this “market failure” because the supplier/s of such rice variety only think of their profits, not public health and nutrition.

Market failure often creates market solutions. An initial lack of supply of a certain good or service that caught the attention of a big section of the public results in entrance of new players and producers. Pretty soon, the problem is no longer lack of supply but over-supply. Over-supply sends a signal to various producers and suppliers in the form of declining prices. The market's self-correcting mechanisms guide societies, producers and consumers alike, to allocate resources where they are needed, and stop supplying those resources when they are no longer needed.

Government failure on the other hand, almost always results in more government checks and balances, more bureaucracy, and hence, more taxes and fees to finance the expansion of the bureaucracy. Government failure is more sinister, more damaging and more disastrous to the lives of people, of private taxpayers especially.

Crisis situation of corrupt administrations should be a good opportunity to remind people that the problem lies less on the morality of the people that administer the state, but in having a big and interventionist state that can turn angels into devils. Stop or limit this transformation of people by limiting the size and power of the government.

Spontaneous Market 2: Market Failure vs. Government Failure

"Market failure", or the failure of the market (the individuals, households and firms who supply and demand certain goods and services) to allocate resources to provide certain human needs and wants, is the single biggest reason why government intervention is justified. And government here ranges from local to national/central government to the UN and foreign aid institutions.

There are two main sources of market failure. First, "public goods" character of a commodity or service. Public goods are those that once provided, it is difficult or impossible to exclude non-paying people from enjoying and free-riding the benefits of such good or service; or the cost of excluding the free-riders is very high. Examples are traffic lights, peace and order, justice administration and rule of law, and national defense for countries with dangerous neighbors. Second are "externalities", positive or negative. Examples of negative externalities are air, water and noise pollution; examples of positive externalities are clean air and cool climate because of the presence of a huge forest or national park, good peace and order condition.

After identifying one "market failure" after another, governments began intervening in many sectors of society. And many people who demand more government intervention forget that it also means new or more taxes, fees and charges; new or more regulations, inspections, registrations, accreditations, other forms of requirements and clearances from the bureaucracy. With valid or invalid reasons to intervene, governments are into infrastructure, utilities, social services, pension, credit and banking, tourism and entertainment, media, and so on.

In fact, it is now difficult or impossible to identify any sector or industry (or sub-industries) of our social and economic lives where there is no government intervention and registration. Even those in the "informal" or "underground" economy do not exactly escape 100 percent of all those government intervention. It's more like out of 10 or 20 registrations, taxes and fees required by government, they only managed to escape 70-90 percent of them.

In public finance theory, the presence of "market failure" is only a necessary but not sufficient condition for government intervention. Because it is highly possible that government will only introduce its own inefficiencies and wastes that will only exacerbate the initial market failure that it wants or purports to correct.

The littany of reports and complaints of government corruption, bribery, plunder, other forms of waste, especially in poorer countries, indeed confirm that government intervention often results in a worse market situation than it wanted to correct. These are now called "government failure", a failure in correcting the initial market failure, a failure in providing genuine public service, which is the only valid and accepted reason for government intervention and taxation.

But instead of government withrawing from those sectors and services where abuses, red tape and corruption are repeatedly noted and reported, "government failure" is addressed by another set of government intervention, by instituting plenty of anti-corruption bodies and counter-check mechanisms and procedures. These moves are essentially pouring more public money to determine how much public money have been stolen and wasted already. The key word being sold to the public is "good governance", meaning more transparency and accountability of public institutions and government officials and personnel. But implied in this formulation is the retention of a big, expansive, and interventionist bureaucracy; only to expect them to behave more transparently.

An option to go "back to the market" and "less government intervention" is far out among the minds and demands of many groups and people, even from those very vocal sectors and individuals that regularly note government failure, like those in media, the academe, NGOs and civil society groups.

There will always be market failure in all spheres of our lives as individuals and communities become more specialized, as tastes and preferences constantly change and evolve. But market failures also create market solutions. An initial lack of supply of a certain food or clothing design that caught the attention of a big section of the public results in entrance of new players and producers of such goods and services where demand is big. Pretty soon, the problem is no longer lack of supply but over-supply. Over-supply sends a signal to various producers and suppliers in the form of declining prices. This signal will force them to innovate, to introduce new designs and formulations, or improve on existing ones, to escape bankruptcy. The market's self-correcting mechanisms guide societies, producers and consumers alike, to allocate resources where they are needed, and stop supplying resources where they are not needed.

Government failures on the other hand, almost always result in more government checks and balances, more bureaucracy, and hence, more taxes and fees to finance the expansion of the bureaucracy. Government failure is more insiduous, more damaging and more disastrous to the lives of people, of private taxpayers especially.

Related topic to government failure is “rent-seeking”. Chapter 4 of the book, "Government Failure: A Primer in Public Choice" written by Tullock, Seldon and Brady (2002, published by Cato Institute, Washington DC), is entitled “The cost of rent-seeking”, written by Prof. Gordon Tullock. Examples of rent-seeking are (a) trade protectionism, where the protected local industry benefits but the local consumers are worse off; (b) private monopolies, and (c) direct income transfers by government where A is taxed and B receives the money.

I would say that around 90 percent of all forms of government restrictions, from erecting rigid labor laws like “expensive to hire, difficult to fire” policies, to expensive welfarism financed by high and complicated taxes, are rent-seeking in nature. They are tying productive people's hands, siphoning off if not outrightly confiscating, their income and savings, and transferred to people often driven by envy and too lazy to accept personal responsibilities on things that ought to be their private domain. The huge government bureaucracy and long layers of politicians that stand in between the people whose incomes are confiscated and the beneficiaries who wait for such wealth transfer eat up precious social resources.

Citizens and taxpayers should assert their their personal liberty, to be freed from various forms of coercions exerted by big governments and their various instrumentalities, by demanding not just "good governance" but more importantly, "less government". After all, less government means less taxes, less bureaucracy, more economic growth and individual freedom.


Voluntary Exchange vs. Forced Exchange

In voluntary exchange, a person comes to another person to offer or sell his/her services like hair cut, massage, tutorial, taxi, cell phone repair, speech writing, and so on; or goods like fruits, vegetables, fish, hammer, nails, hamburger, needle, book, tv, car, bus, boat, and so on. The other guys choose from among those who offer those various goods and services, and pick the ones who offer them good value for their money. Here, no one is coerced to surrender his/her money to someone else, unless there is a corresponding exchange of a satisfying service or commodity given.

Those who offer good quality services and commodities at an affordable and competitive price naturally attracts more clients and customers; through time, those producers and suppliers become bigger, so long as they maintain the quality of their services and the competitiveness of their prices. While those who offer lousy services and bad quality commodities will lose their customers and clients; pretty soon, they will become bankrupt and be forced out of the competition, at least temporarily. Suppliers and sellers know this, so they are compelled by the circumstances, by their environment, not to become complacent producers. In this competitive and non-distorted situation, public and social welfare is served. Those who sell food are forced to sell good quality food. Those who sell their labor are forced to render good quality work. Those engaged in trading and marketing are forced not to over-price their products and services. Those who lend money are forced not to impose very high interest rates.

In forced exchange, people are coerced to surrender their money to a big and armed body or institution. Their salaries are automatically deducted of a certain percentage; their interest earnings in their bank deposits, their gains or profit from selling their house or land or other resources are automatically withheld of a certain percentage. When they consume something like medical and dental check-up, or buy something like soft drinks or gasoline, the price they pay is much higher because of surcharges imposed on the original price of those services and commodities.

Also in forced exchange, even if you do not believe that this and that services should be provided by the big institution, or you believe it should be provided but you do not like the quality of the services given to you, funded by the money that was forcibly taken away from you, you have to bear with them. Even if you do not like the personnel and people assigned to help you because they are corrupt or arrogant or lazy or whatever traits that you do not like, you have to bear with them.

Now, who are engaged in voluntary exchange? And who are engaged in forced exchange? Are they the angels and missionaries for the former, and the aliens and terminators for the latter?

The market -- private individuals, households, firms, voluntary organizations -- are engaged in the former. And government -- national and local government units; executive, legislative and judicial bodies -- are engaged in forced exchange.In the market system of voluntary exchange, the system of rewards and punishment are fast and spontaneous. Those who keep on producing good quality services and commodities at a good price continue expanding, and those who keep on producing bad services and/or selling at unreasonable prices will soon be out of business. No paper work, no bureaucracy, no litigations needed. The incentives and disincentives are very clear and transparent.

In the government system of forced exchange, the system of rewards and punishment are long, managed and bureaucratic. The corrupt and robbers can be rewarded with material wealth and undeserved attention, their shenanigans to be determined in long court proceedings, assuming there will be enough witnesses who will pin them down. Some industrious and efficient ones can be left poor and unrecognized, stuck in fixed incomes and covered by the bureaucratic maze where the ego-trippers get the media attention.

Also in forced exchange, even if you do not need certain services and government personnel assigned in your community or workplace because you think they are unnecessary and costly bureaucracies, you have to bear with them. Their offices and positions have been created already by the higher bureaucrats and politicians, and their annual operating budget have been allocated already, courtesy of the various taxes, charges and fees that were forcibly taken from you. And assuming that you need certain services from government, but you do not like the personnel assigned to perform them because they are arrogant and possibly corrupt, you have to bear with them. They are accountable to the higher officials who recruited and appointed them in their posts, not to "the people", an amorphous and anonymous body who cannot even successfully fight the forcible deduction of their incomes and savings.

Lazy and arrogant government personnel can be kicked out of office, but you have to set aside substantial time and effort, and money of course, to take short leaves from your work and stand up as witness to usually long court procedures.It is therefore important that individuals should assert their personal freedom, their right to voluntary exchange, and to oppose an ever-widening system of forced exchange. Not that people should call for zero government. We need government after all, say to punish the guys who killed your cousin, or raped your daughter, or burned your car, or stole your cellphone, or grabbed your land. Government has an important but limited function in our lives. Its expansion to so many sectors and facets of our lives however, is not only dangerous, but has already wreaked havoc to our lives. The task of asserting our individual liberty is a continuing challenge for us all.

* See also Spontaneous Market 1: Profit, Trade and Personal Responsibility, May 22, 2006

Pol. Ideology 2: Evolution of Market and State

At the beginning of human civilization, in primitive hunting societies when resources were generally unlimited for a small population, there was no need for skills “specialization”. And so people were food hunters, home builders, warriors and self-administrators, all rolled into one. As population and human wants began to expand, some degree of skills specialization developed and so men learned to trade with each other. The animal and fish hunters traded their excess catch with craftsmen for the latter’s carpentry, hunting weapons, musical instruments and other artistic services. They traded with farmers who practiced the early technologies of agriculture.

Thus, the MARKET for the exchange of goods and services spontaneously arose, naturally invented. There were not too many varieties of each goods and services and hence, there was general homogeneity in product types and qualities. Hence, the presence of money as mode of voluntary exchange was not necessary; barter – goods for goods or services – was possible. The aggregate social surplus was small and communities could not afford, nor was there a need for it, to have a government made up of full-time administrators and enforcers of rules, whether collectively-agreed upon, or imposed from the top.

Later, as population and economic activities expanded, various forms of MARKET IMPERFECTIONS arose, like monopolies and oligopolies. This is natural because under unrestricted market exchange, consumers reward the efficient producers with continued patronage, assuring the latter’s business growth and expansion. Consumers also punish the inefficient producers, those who sell bad quality commodities and services at bad prices, with non-patronage resulting in the latter’s business stagnancy if not bankruptcy. Other sources of market imperfections are “negative externalities” associated with production such as pollution and noise, as well as “positive externalities” wherein potential producers of “public goods” like traffic lights in busy intersections, and peace and order in communities, are not inclined to produce the services because there will be many “free-riders” who will only enjoy the benefits but will not pay or contribute to shoulder the full cost of such “public goods”.

So men invented GOVERNMENT, and hired administrators, regulators and policy-makers to correct many of those market imperfections. The latter of course invented TAXES and various fees to finance the effort of dealing with these complications. Initially it went well. Many disputes among the citizens were peacefully settled; some monopolies were regulated from further inflicting non-competitive behavior. The “externalities”, both negative and positive, were addressed.

Later, governments introduced GOVERNMENT FAILURES and inefficiencies – bureaucratic red tape, corruption, exorbitant tax rates, multiple taxes and fees, excessive trade barriers, state-sponsored monopolies, and so on. The state was used by certain factions of capitalists and businessmen to protect themselves from other factions or batches of capitalists and entrepreneurs, both local and foreign, both existing and emerging. Among such barriers to entry of new competitors are government-legislated franchises and monopolies.

Government also institutionalized PROTECTIONISM of many local businessmen and producers in the form of high import tariffs, import quantitative restrictions, other forms of trade barriers to protect themselves from foreign capitalists and producers. Local businessmen erected barriers (either mandated in the Constitution or through Parliament-enacted laws) against entry of too many foreign inventors that will compete with their monopolistic and oligopolistic market structure. Or government bureaucrats, either by themselves or upon the prodding of the protected businessmen, create a maze of regulatory restrictions that effectively discourage the emergence of too many entrepreneurs, especially from ordinary employees, farmers, or managers. The existence of (a) high unemployment and underemployment rates, (b) high informal or underground economy, are among the major proofs of the success of bureaucratic nightmare.

So men invented non-profit organizations – more commonly referred to as non-government organizations (NGOs), people’s organizations (POs) and other civil society organizations (CSOs) – to reform government and state failures. Initially, it dampened state bureaucrats’ and policy makers’ appetite for more corruption and inefficiencies. But since many non-profit organizations are themselves “allergic” of the market and hate the concept of profit, much less huge profits, they can only demand governance reforms but not governance exit in many areas and sectors that government has already intervened. A “small and limited government” is not within their political horizon because they themselves are advocates of big government (aka “statists”), they themselves want to run the state and its interventionist agencies and corporations someday.

Thus, it became evident that “reforming government” by statist reformers, or by non-competitive capitalists, had become an oxymoron. Bureaucracies and interventions, once created, seldom decline, let alone die. And governments later invented habitual BUDGET DEFICITS (ie, revenues lower than expenditures). Many politicians run for government positions not to rein in government intervention, but to maintain, if not expand and worsen, those state failures.

Early in the last century, some groups went extreme and invented communist parties and socialist parties to turn an already super-imposing state into a “Big Brother” interventionist socialist state, supposedly to “centrally plan” the basic needs of its people. Later, many socialist states could not even plan and produce how many tons of rice and bread, how many million liters of premium gasoline and diesel, how many pairs of jeans and shoes, what varieties of oranges and bananas, will be needed by their people in a month, in a year. Scarcity led to political instability, which later led to the collapse of many socialist governments, from the Soviet Union to Eastern Europe. The remaining socialist states (China, Vietnam, Cambodia, etc.) survive because they have allowed the market system to exist in the economic sphere while maintaining political monopoly.

So now, many former socialist states are back to allowing private and voluntary exchange of goods and services by their citizens. Once the central-planning, chief-allocating, all-encompassing state shrinks, the market and the price system would know where, when, how much, and for whom goods and services will be allocated.
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Not all Market Failures Need Government Intervention

Not all “market failures”, like the absence of exchange by people who supply and demand a particular good or service, or the presence of negative externalities such as resource depletion, will need government intervention. There will always be “market failure” in all sub-sectors or sub-industries given the changing preferences of people who demand ever newer products and services. Or such “market failure” can occur when demand temporarily does not respond to a sudden availability of a new product or service as result of technological innovation, weather and natural events, other factors.

Case 1. Market Failure due to Absence of Supply

Some beautiful waterfalls in a country which have big potential for eco-tourism are not developed. Market failure here springs because while there is big demand by visitors to see beautiful waterfalls, there is no entity that will build the roads to make the place accessible, construct hand rails in dangerous areas, develop picnic grounds and cottages, and so on. Some politicians and anti-market groups can declare this as “market failure” and will move to establish a new government agency called “Waterfalls Development Authority (or Corporation)”, hire personnel, consultants, and politicians-appointed administrators. To do so, government will have to find financing through new tax measures, or raise existing taxes and fees.

There will be many groups of entrepreneurs who will be interested to develop the area, pour their own private resources, to earn money someday. But certain problems exist, like bad peace and order situation due to the presence of rebels and extortionists; problem with neighboring private landowners that will affect the access road to the area. It is also possible that intimidation and extortion is done by the local politicians and police themselves, or by the government's environment ministry or agency in the form of a maze of rules, regulations, and fees to pay, so that the cost of complying with these regulations alone would already cost a big amount of money.

If these problems (especially bureaucracy-created ones) are minimized if not removed, then private entities will compete to develop the area using their own resources, and no burdensome tax hikes or new tax measures will be needed. Applying user-fee principle removes the negative externalities of taxation, where even people who will not get to see those waterfalls are taxed.

There are millions of cases where supply is absent despite existence of demand by other people. There is absence of supply of a mango variety that produces 10 metric tons per tree per year, that is resistant to 95% of all known anthracnose and other mango pests in the world. Demand for this kind of mango variety will be very, very high, so there is another market failure there. But this does not mean that government should come in and put up a Mango Research and Development Authority, pouring vast amounts of money to be taken from the pockets of taxpayers. Time and market dynamics between suppliers and consumers will determine when, where, how and how much such commodity or service will be made available.

Case 2. Market Failure due to Absence of Demand

There are thousands, even millions, of scientific and technical papers languishing in academic libraries around the world, many of which have great engineering, health, agricultural, and other economic applications and potentials. But there are not enough takers from businessmen and entrepreneurs at the moment. Government need not put up a research and development institute, extend huge amounts of credit, set up a government corporation, or other forms of intervention to each and every promising research proposal. For every intervention that government can think and implement, there is corresponding expropriation from taxpayers’ pockets and income; there is corresponding new batch of bureaucracy created that need to be maintained; there is corresponding new batch of rules and regulations that will complicate otherwise simple situations.

During the rainy season, there is absence of enough supply of tomatoes, so that average price in the Philippines can jump from off-season price of P2/kilo to P40 to P50/kilo. D during summer, with bumper harvest, there is absence of enough demand so that average price can slump to P2-P5/kilo. Some tomatoes are unsold and left to rot by farmers because the cost of harvesting and transporting them to public markets are higher than both wholesale and retail prices. In this situation, government need not create a Tomato Regulatory Authority or Tomato Development Corporation to stabilize prices and protect tomato farmers during summer, and protect consumers during rainy season. Such will entail additional taxes and fees, bureaucracies, and political intervention in price-setting.

Case 3. Market Failure due to Negative Externalities

Land clearing and conversion, from forest use to agricultural use, creates negative externalities (or side-effects). Soil erosion is exacerbated, streams and rivers are covered with eroded soil and rocks, and marine life is affected. But such land conversion is a natural reaction of people based on emerging prices of agricultural vs. forest products. As population expands, demand for more food production increases, so will the price of agricultural crops, from grains to vegetables and fruits. If people, especially those living in the affected area, do not value highly the forests, then more land conversion will happen, until it reaches a point that people’s valuation of forest vegetation is deemed higher than more ricefields, banana and mango plantation, sugarcane and coconut plantation.

But the usual reaction of statist individuals -- those who believe in more government intervention, subsidies and taxation -- is for more government regulation, retain state ownership of vast public forest land. This thinking prevents the emergence and establishment of clear property rights to citizens as individuals, cooperatives, people’s organizations, or corporate entities. They gloss over the natural tendency of people that those resources that belong to no one or everyone tend to fall in disrepair, while resources that belong to you, you tend to take care of.

Case 4: Market Failure due to Positive Externalities

Among the so-called “public goods”, or commodities and services that benefit the majority if not everyone, are traffic lights, peace and order, justice administration, and clean air. When these services are provided, "free-riders" or people who enjoy the benefits of certain services but are not willing to voluntarily contribute for the maintenance of such services. Hesitance of private enterprises to provide such services stems from the fact that once provided and supplied, it is difficult to collect revenues from the free-riders, and it is almost impossible to exclude other people who benefit from the services but are not willing to pay the costs of such services.

But it is shown by many private residential villages that many of those considered “public goods” can be privately-provided, and they are able to discourage or eliminate the free-riders. In private villages, subdivisions and residential buildings, the homeowners’ associations act as small government. They administer the provision of basic infrastructure and social services functions that are thought to be the “turf” or domain of government – road and drainage construction and maintenance, garbage collection, street lighting, security and protection of lives and properties, and even occasional immunization and other health care services. They are clear examples that provision of many so-called public goods can be privatized. And the private enterprises are able to collect sufficient revenues to make the service provision sustainable and continuing.

Bottomline: Not all market failures are worth solving, curing, or intervening by government. Buyers and sellers adjust themselves through time given changing patterns in supply and demand conditions. Government “cures” in non-core functions, whether waterfalls development or tomato regulation or tertiary education, often do more harm than good. There is wisdom in this quote, “if market imperfections arise, government can help by doing nothing.” This is because government interventions very often (a) are financed too far and widespread (raising taxes, reducing citizens’ take-home pay), and (b) are done too long (the agency and the bureaucracy stays on even after private players have adjusted to changes in supply-demand situations).