(Don Boudreaux)

… is from page 13 of my colleague Richard Wagner’s excellent 2017 intellectual biography of Jim Buchanan, James M. Buchanan and Liberal Political Economy (link added):

[Ronald] Coase’s key point of departure was that any situation described as one of market failure simultaneously implied that profit opportunities were present. This didn’t mean that market failures would automatically evaporate, but it did mean that market processes contained generally strong forces operating in the direction of capturing the gains from trade that are latent within a society.

DBx: Very true. Mainstream economists continue to be blind to how the potential profit opportunities inherent in many market “failures” incite entrepreneurs to create “solutions.” Indeed, in one very real sense, all profit earned in markets is the reward for the successful “solving” of market “failures.” (I surround “solutions” here with quotation marks to indicate my acceptance of Thomas Sowell’s insistence that in our world of inescapable scarcity – including scarcity of knowledge and information – there are no solutions to problems of the allocation of resources; there are, instead, only trade-offs. A “solution” in any of these cases is a trade-off struck in some manner that can reasonably be called “optimal.”)

But mainstream economists are blind also to the nature and constraints of government action. Astonishingly, they have no credible theory of how or why empowering government officials to “correct” market “failures” will result in successful outcomes. Many of these officials, take note, are vocal advocates of using price ceilings to prevent so-called “price gouging” – that is, to prevent the market working to reduce as much as possible the negative impacts of demands for certain goods and services rising suddenly and significantly relative to the supplies of those products. The idea that such officials can be trusted with the power to intervene scientifically to correct market “failures” is nuts.

Government officials are simply assumed by mainstream economists – and by most pundits – to have both the proper motivation and the requisite knowledge to improve upon market processes and outcomes.

Maddeningly, those who point out this mysticism at the foundation of mainstream welfare economics are accused – by these mystics – of being unscientific simpletons gripped by ideological bias.