Policy in a Fog
By Arnold Kling
In a wide-ranging essay on the problem of incomplete information, I write,
Perhaps the most important point of all is that government officials operate in a fog. If one looks at all of the imperfections and shortcomings of the market, then there appears to be a nearly infinite set of opportunities for the government to improve on private sector outcomes. However, it is important to remember that the information that government has is often no better than what is available to private individuals.
For the private sector, one of the most important signals that cuts through the fog is the profit and loss statement. If nothing else, a company that makes too many mistakes will find itself out of business. Government programs are insulated from such signals. I believe that as the pace of innovation has increased in our society, the relative inefficiency of government has gone up. Both private-sector operations and government programs become anomalous and obsolete more rapidly. However, government anomalies persist, while in the private sector market discipline serves to weed out failure. The more dynamic the economy, the larger the drag exerted by the government.
For Discussion. What I am suggesting is that government tends to move slowly, particularly when it comes to terminating a process or a project. As the surrounding world moves more quickly, I suggest that this makes government less effective. Are there offsetting considerations?