Who should make decisions for us and tell us what to do? Most human beings are irrational and regularly make very stupid choices, so it's not safe to let them make their own decisions. Should we instead rely on elected representatives, assuming that they are the smartest people around, always do the right thing as would be expected from good public servants and never make mistakes? Or should we all be left free to make our own choices, even if it later turns out that we made completely the wrong decision?
Market failures are believed to occur when markets ‘fail’ to produce the results people would like to see. ‘We need a law to make sure this never happens again!’ they cry. If law were automatically able to produce the intended results then passing more laws to fix problems would be the perfect solution to market failures. But unfortunately, law generates spectacularly costly failures of its own, plus some unforeseeable new problems that didn’t exist before, plus the risk of losing your liberty if you inadvertently break the law, plus the legal bill. Now on top of your market failures, you have legal problems and legal fees to pay. ‘We need a new law to make sure the old law will work better!’ the people cry. Oh dear. Luckily, there is a better way.
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