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a public good, but this notion is questionable. It does not
suffice to cite stale clichés about the benefits of an educated
population. Education yields significant enjoyment and
pecuniary returns to those who seek it. The private incentive
to become educated may well suffice to generate high levels
of educational investment. Not surprisingly, some theories
of market failure (signaling theories) say we have “too
much” education, whereas other theories say we have “too
little” education.
Perhaps most important, any given market failure must
be compared to what is likely to occur if the government
were to attempt to rectify the problem. It is not enough to
establish that markets fail to provide a perfect outcome.
All policy analysis is comparative, and we must consider
whether markets or politics, in a given instance, will lead
to greater imperfections. Politics brings in its wake
bureaucracies, poorly informed voters, high discount
rates, and special interest groups, among other imperfections.
Once government starts intervening to support the
production of public goods, it is likely to overstep its
bounds and create new problems that were not initially
present. It is absurd to point to market failures and to
totally ignore political failures.
Market failure theories should be evaluated within the
broader context of problems centering on the lack of or the
difficulty of acquiring the relevant knowledge. In many
cases, it is difficult to determine just how much of a good
or service should be produced. For this reason, it is almost
impossible to second-guess market provision. This uncertainty
does not prove that market provision is always the
correct one, but it does make us more skeptical about finetuning
the economy. Often the best the economist can do is
analyze the general properties of differing regimes and ask
which does best at serving consumer welfare, keeping the
peace, and encouraging innovation. Here the record of a
market economy and the rule of law is a relatively strong
one. We may wish to strengthen markets, rather than intervening
each and every time we think we can improve on
them. Such discretionary interventions may erode the
long-run economic, political, and cultural foundations of a
market order.
In summary, market failure is a broad and complex area.
It potentially encompasses the entirety of our economy and
involves many disparate policy issues. Few economists
would argue that public goods and externalities can never
justify government intervention. Nonetheless, the public
goods and externalities arguments are often overrated in
their force. Public goods and externalities do exist, but they
provide incentives for new ways to generate and capture
gains from trade.
See also Externalities; Free-Market Economy; Regulation; Voluntary
Contract Enforcement
TC
Further Readings
Cowen, Tyler, ed. Public Goods and Market Failures: A Critical
Examination. New Brunswick, NJ: Transaction, 1992.
Cowen, Tyler, and Eric Crampton, eds. Market Failure or Success:
The New Debate. Cheltenham, UK: Edward Elgar, 2003.
Klein, Daniel, and Fred Foldvary, eds. The Half-Life of Policy
Rationales: How New Technology Affects Old Policy Issues.
New York: New York University Press, 2003.
MARRIAGE
Marriage is a socially sanctioned union that imposes rights
and obligations on the parties. Although it can consist of a
variety of combinations of men and women, the most common
form has been a monogamous relationship between a
man and a woman. Although libertarians would permit
individuals to make the decisions that are most likely to
increase their welfare, subject to limitations if there are
effects on third parties, seldom have people been free to
make their own decisions about marriage—and especially
their spouse. For most of history, decisions about whom
someone would marry were controlled by others, especially
the spouses’ families. As the ability of individuals to
choose their own spouse has increased, familial restrictions
have been replaced by legal ones imposed by the
state. The most important restrictions on whom one may
marry are on the ability to determine the basis on which a
marriage will be dissolved and on the financial and custodial
arrangements that will follow. Restrictions on the right
of multiracial couples to marry have been removed, yet
these restrictions remain in place in most states for samesex
couples. Most industrial nations have instituted a system
that permits unilateral divorce and combined this
system with limited compensation to a divorced spouse,
which often results in less desirable outcomes than those
that people could agree to on their own.
Throughout most of history, the rights and obligations of
marriage were informal, enforced by family or clan members.
With the introduction of the Justinian Code in the
6th century, laws were established to regulate marriage.
Nevertheless, for most couples in Europe, marriage continued
as an informal arrangement. However, in 1563, the
Council of Trent required that all valid Catholic marriages
had to be celebrated in a Catholic church by a priest and
before two witnesses. The Reformation effectively introduced
civil marriage, regulated by the civil authorities,
although it did not preclude marriage being solemnized in a
religious ceremony.
Legally, marriage is a contractual relationship that vests
the parties involved with a new legal status. Just as with
other binding contracts, marriage requires that the parties
have the capacity to enter into contracts and that they be