Brad DeLong's Strange Concept of Market Failure

By David Henderson.

"“There’s someone in Bangladesh who would almost surely be a better economics professor than I am and is now behind a water buffalo,” he told me. “The market economy gives me and my preferences 200 times the voice and weight of his. If that isn’t the biggest market failure of all, I don’t know what your definition of market failure could possibly be.”

This is from Annie Lowrey, “The Economist Who Knows the Miracle is Over,” The Atlantic, September 3, 2022.

Don Boudreaux has made the point that it’s hard to claim this as market failure when Bangladesh is a country whose markets are most repressed by government. He points out that in the 2022 edition of the Annual Report on Economic Freedom of the World, about which I’ll have more to say in a day or two, Bangladesh ranks a dismal 139th out of 165 countries that are rated. That’s a major contributor to the water buffalo driver’s poverty. I won’t say more about that because Don said it well.

But there’s another point to make. The Bangladesh government is not the only government preventing that water buffalo driver from being an economist: governments in richer countries such as the United States also play a huge role. Whatever you think of restrictions on immigration, they are restrictions; they are heavy regulation of the labor market. If the United States substantially relaxed its restrictions and let, say 5 million Bangladeshis into the country, that water buffalo guy might actually get here and become an economics professor.

And Brad might be right: this former water buffalo driver might well do a better job than Brad at teaching what is, and what is not, market failure."