Markets versus Politics – The Real Choice: … Too often policy arguments proceed as follows: A) politics “fails” because it does not produce the theoretically optimal result, therefore B) market processes are necessary. But B does not follow from A. The failure of government to produce an optimal result does not ensure that market processes will do a better job. From a social democratic perspective – or any perspective that is inherently suspicious of privatization – the burden should be on those advocating market processes to explain why the marketplace can be expected to produce a better result than the political process. In such an inquiry, the theoretical virtues of a basic equilibrium model of perfect competition are no more relevant than Pigouvian theories of government intervention. Both are blackboard abstractions that often have little bearing on what occurs in the real world. What matters is how privatization—and make no mistake, the subordination of political decisions to the marketplace is always political—is likely to affect the status quo ante, and whether the consequences of such intervention (and the attendant rent-seeking, transaction costs, etc.) constitute an improvement in the real world.
The introduction of market mechanisms into politics may be well intentioned, but that does not make it any more likely to generate positive results. Indeed, insofar as noble intentions leave the likely consequences of such interventions unexamined, such policies may make us all worse off.
(see here for original).