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The theory of government failure

By Julian Le Grand

Abstract

This article outlines a theory of government failure that parallels the more well-established theory of market failure. It builds on the work of the public choice school concerning the behaviour of governments under the assumption that all relevant agents pursue their selfinterest. It examines the theoretical consequences for efficiency and equity of three kinds of government activity: provision, subsidy and regulation. The conclusion is reached that all three may create inefficiency and inequity, but that the form and magnitude of the failure will differ with the type of activity; hence it is important that the three are distinguished. It is also emphasised that the extent of government failure in each case (and whether it is greater or smaller than the corresponding areas of market failure) is ultimately an empirical question, not a theoretical one

Topics: JC Political theory
Publisher: Cambridge University Press
Year: 1991
DOI identifier: 10.1017/S0007123400006244
OAI identifier: oai:eprints.lse.ac.uk:3977
Provided by: LSE Research Online
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