The Failure to Explain Government Failure

This chapter assesses the evidence of various theories’ ability to explain government failure in the book, Market Corrections not Government Interventions: A Path to Improve the US Economy. The theoretical literature has identified the major sources of government failures as comprising voters’ inadequate knowledge about policy issues, the influence of organized interests on policymakers, the self-interested behavior of policymakers and self-selection of individuals who choose to work in government, and the weaknesses of government institutions. However, the evidence obtained from tests of the existing theories suggests they have very little explanatory power and are unlikely to help guide improvements in government policy. Capture theory—the idea that government policymakers are captured by the entities that they are supposed to regulate—has been used to explain specific policy failures and empirically tested more often than any other theory of government failure. I conclude that capture is not more persuasive than alternative idiosyncratic explanations of a policy failure. Clearly, more work is needed to explain government failure but the complexity and opaqueness of policymaking makes it extremely difficult to explain the many relevant factors that may have contributed to a policy failure.