The government toolkit is a child’s toy

In this post on Cafe Hayek blog, Don Boudreaux takes down the idea some solutions are best suited for markets and some are best suited for government.

In this case, Dani Rodrick makes the argument in his book, Economic Rules, presenting it as if this is what smart people do, drawing on the analogy of finding the right tool for the job. Here’s Rodrick:

It is dogmatic and dangerous to assume that one solution or one approach is the answer to every problem.  Some problems call for the use of screwdrivers, others call for the use of hammers.  Only a benighted fool insists on using a screwdriver to hammer in nails and on using a hammer to insert screws.  The wise, non-ideological, enlightened, open-minded, reasonable, and scientifically aware person sometimes uses a screwdriver and other times uses a hammer.  What could be more reasonable?!

Yep, that sounds reasonable. But, consider Boudreaux’s reponse:

The error in this formulation is that markets are many tools.  Markets are a toolkit with far more tools in it than government has access to.  While government has only a few tools – mostly hammers (some sledge), saws, and clamps – the market is filled with many, almost countless, tools.  And the market’s tools are much more varied, nuanced, specialized, and creative than are the government’s simple set of tools.

That’s correct.

Government’s toolkit:

Government toolkit

The market’s toolkit:

Market's toolkit

 

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