Mention the government and the market and all academic reflection and civilized discussion dissolves into heated monologues. Politicians are an extreme case.
Why so? Why for instance is it always the government versus the market, instead of, say, which form of organization to choose among government, market, culture and corporation? One reason must be Karl Marx, who reified the conceptual distinction between the production forces labor and capital into a fundamental struggle for power between the class of the laborers and the class of capitalists. A second obvious and related reason must be the deeply ideological Cold War between the United States and Soviet Union of the 1950s-1980s. In any case, it is unfortunate, as an understanding of the relationship between the government and the market is central to economics. How are the government and the market connected? Without any claim as to what is desirable or not, I think it is useful to distinguish between three kinds of connections. Read more