Lindblom - The Market System - Afghan Journalists' Committee

Too Little,Too Late 169sion of the hand of the state. Sometimes the complaint isvalid, sometimes not. Either way, to maintain a high rate ofactivity in the market sector, societies often will move onlytimidly in the nonmarket areas, such as education andhealth, where at least the compulsion of taxes is required.The result is market efficiency within market-system domainthat comes at the expense of inefficiency in other domains.We may note in passing that the frequent objection tostate “interventions”—that they obstruct market efficiency—is invalid because incomplete. Suppose an income tax inducesa singer to curtail performances, thus depriving audiencesof what they highly value (as indicated by their willingnessto pay). Whether the tax is on balance an inefficiencydepends on its effect on both the singer’s choice and onwhether the tax funds are used to reduce an inefficiency inresource allocation, such as inadequate medical care forsome segment of the population.Prior DeterminationsTo achieve efficiency, the necessary compulsions are notsimply those of taxation and the welfare state. They includea more important category of compulsions that I shall callprior determinations. These are beyond the capacity of themarket system, and they greatly alter—and reduce—claimsof market efficiency.Market systems require two sets of decisions or determinations.One set consists of market transactions. Theother consists of those “prior” determinations of the distributionamong people of assets and skills that are then offeredin market transactions. These prior determinationscome from custom, law, and historical accident; and they