In the Hayekian world-view, markets spontaneously evolve to satisfy human wants; state systems by contrast are "designed", usually to thwart those wants. This is just bad history. Markets may be natural to man — they certainly existed from the earliest times of which we have record. But a large part of the market system was deliberately created — or in Hayekian language "designed" — by government. This is especially true of the extension of markets to the "factors of production": land, capital, labour. (One has only to think of the British enclosure movement of the 18th century.) The result has been an increasingly marketised society, whose output (GDP) is exclusively measured in marketed products. It requires quite an exceptional degree of unrealism to believe that individual choices today are made in a non-designed system (though, like the British constitution, it may not have been designed all at once). The extent and penetration of markets has always been settled over time outside markets: by ideas, politics, vested interests, and custom. People choose among availabilities; what is not available is not chosen.
In praising the sovereignty of consumer choice, Hayekians decry the value of collective choice. It is not the case that governments step in to thwart people's choices. In a democracy, people choose collectively through the political system as well as privately. People may choose to shop in supermarkets, because the goods are cheaper, but may prefer to live in a society in which there are fewer supermarkets. The second choice can only be made through politics.
Hayekians typically contrast market success with government failure. "Haven't these people read any public choice theory?" Horn asks. "How come they so blindly trust the wisdom of the democratic process? Of course it is only through ignoring the pervasive evidence of government failure . . ." Leaving rhetoric aside, the substance of her argument seems to rely on the well-known Principal-Agent problem: the difficulty which the Principal (in this case the voter) has in holding the Agent (or government) to account. This is certainly an important problem. But exactly the same problem exists in the private sector, especially in the modern corporation, where it is almost impossible for the owners (shareholders) to change the policies of management. Which failure is greater is impossible to say a priori. Nor is the idea that private firms face a "hard" and state firms a "soft" budget constraint of much help in assessing their relative efficiency, since managers can misgovern their companies for years before shareholders wake up. Rather than contrast an imbecilic government with a perfect market system, it is more fruitful to discuss a sensible division of labour between the two, and under what conditions both might be made successful.
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