Brad DeLong’s Strange Concept of Market Failure

“There’s someone in Bangladesh who will almost certainly be a better economics professor than me and is now after the water buffalo,” he told me. “The market economy gives me and my choices 200 times its voice and weight. If that’s not the biggest market failure of all, I don’t know what your definition of market failure is.”

This is from Annie Lowry, “The Economist Who Knows The Miracle Is Over” the atlanticSeptember 3, 2022.

Don Boudreaux points out that it is difficult to claim this is a market failure when Bangladesh is one of the countries whose markets are most suppressed by the government. He noted that in the 2022 edition Annual Report on World Economic Freedom, about which I will say more in a day or two, Bangladesh is ranked 139th out of 165 countries rated. That is a major contributor to the poverty of water buffalo drivers. I won’t say more because Don said it well.

But there is another point to make. The government of Bangladesh is not the only government that prevents water buffalo drivers from becoming economists: governments in rich countries like the United States also play a huge role. Whatever you think about immigration restrictions, they are is Constraints They are heavy regulation of the labor market. If the US relaxes its restrictions enough and allows 5 million Bangladeshis to come home, that water buffalo might actually come here and become an economics professor.

And Brad may be right: this former water buffalo driver might do a better job than Brad of teaching what is and isn’t a market failure.

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