Gordon Tullock used to like to tell this little story to illustrate an important point, and I figured it should be on this blog.
The Roman emperor decided to hold a competition to determine the best singer in the whole of the empire. News of the contest was spread far and wide. On the appointed day, only two singers appeared. The first was presented to the emperor and began to sing. After a minor mistake or two, the emperor declared the competition over and awarded the prize to the second singer.
The lesson this was intended to illustrate was that when there were perceived market failures, the tendency for quite a long time in the economics profession was to say that the government should be used to correct them. In fact, in some quarters this persists to the present. The problem is that the second singer might have been much worse than the first singer, and it’s silly to look at only half of the problem before declaring the solution.
Government failure is every bit as problematic as market failure, and there are good reasons to believe that in the real world it’s likely to be worse. Since we do not live in a perfect world, some (market) failures might not be worth correcting; the cure might be worse than the disease.