QOTD: Ronald Coase

Contemplation of an optimal system may provide techniques of analysis that would otherwise have been missed and, in certain special cases, it may go far to providing a solution. But in general its influence has been pernicious. It has directed economists’ attention away from the main question, which is how alternative arrangements will actually work in practice. It has led economists to derive conclusions for economic policy from a study of an abstract of a market situation. It is no accident that in the literature … we find a category ‘market failure’ but no category ‘government failure.’ Until we realize that we are choosing between social arrangements which are all more or less failures, we are not likely to make much headway.

From Ronald Coase’s 1964 paper “The Regulated Industries: Discussion” published in the American Economic Review.

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