“Societies should not rely on market forces to protect the environment or provide quality health care for all citizens …”

Sunday, October 21, 2007 by the Sunday Gazette-Mail (Charleston, West Virginia) | Nobel Prize Sees What Market-Fundamentalists Don’t | by Rick Wilson
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Three Americans, Eric Maskin, Roger Myerson and Leonid Hurwicz, shared the honor for their work in mechanism design theory, which studies under what conditions markets work well or don’t. Sneak preview: They do better with private than with public goods.
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According to this cult, the market is like an all-wise and all-good but jealous god which becomes exceedingly wrathful when interfered with by things like coal mine or workplace safety laws, minimum wage protections, or taxes that pay for health, education or other services. Its ways are not our ways, nor are its thoughts our thoughts. And if it demands an occasional human sacrifice, we just have to deal with it.
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... Here’s the short version of a key finding: Markets work well with what economists call private goods, like refrigerators or cars, but not for public goods, such as a clean environment or public health.

According to Maskin in an article in Bloomberg.com, “There are some things we want that are never going to be attainable by markets,” he said in a telephone interview. “If we are going to get them at all we have to find alternative ways of delivering them. That’s where mechanism design comes in.”

A Reuters report on the prize noted, “Societies should not rely on market forces to protect the environment or provide quality health care for all citizens …”

In such cases, public investments and policies should promote and protect public goods.

None of this would have come as a surprise to Adam Smith, who wrote in 1776 that there was a need of government support for “public institutions and those public works, which, though they may be in the highest degree advantageous to a great society, are, however, of such a nature that the profit could never repay the expense to any individual or small number of individuals, and which it therefore cannot be expected that any individual or small number of individuals should erect or maintain.” ...