And if in modern American politics immigration is unrelated to social insurance, then even a small amount of belief in diminishing marginal utility of wealth leads to the conclusion that the government ought to put its thumb on the scale on the side of a more middle-class and a less Second-Gilded-Age economy and income distribution. How the government should do this, however, is an extremely hard problem--a problem that it is even hard to think about because we lack an adequate theory of market failure.
"...we lack an adequate theory of market failure". I read those words last week, they percolated to the top of my consciousness today.
We just spent $17 (w/ shipping) an a clock timer we ordered from a vendor of laboratory equipment. Five years ago one could spend $9 at the grocery store on a perfectly adequate mechanical timer that worked well and lasted for years. Now one can spend $5 on a nice-loooking mechanical timer that's absolute garbage and breaks within a few weeks of use. (Yes, it's made in China, but that's not the real point.)
The $17 timers we ordered don't feel any more robust or reliable than the ones now sold in the hardware store.
Then there's tax preparation software. I've used TurboTax and TaxCut. If only I could invoice them for the time they cost me.
For me, these are market failures. I run into these market failures every day, all over the place. The things the market is providing aren't the things I want or need, they aren't the things my family wants or needs. The only toys we can find that are any good are made in Germany -- and they are getting harder to find. Sure -- the price is right. But it's not the right stuff even if it were free.
Yes, we need an economic theory of market failures. My gut sense is that they're getting more and more common. My suspicion is that the complexity of the modern economy, and modern products, has outstripped the capacity of human beings to make informed decisions. We need to upgrade humanity to deal with the 21st century marketplace. But if the market is not serving us, then who (or what), is it serving ...?