I think we both see economics in the same way. Its a discipline where you have to learn some logical tools, but then when it comes to applying your knowledge to reality you have to take into account a wider range of factors, maybe even be a bit multi-disciplinary.

Like I said before, I don’t think we are criticising free-marketeers on this blog, not in the way Dani Rodrik does. We are just trying to highlight ways in which government intervention could be useful, while supporting the notion that a market efficiently prices in a lot of things.

Also free-marketeers must see something different to us if we have different conclusions. Like you said the difference is that we are feel government failure can be partially overcome, which is a normative, value-laden assumption. So the first comment was the right one, I get so confused.

I hope that’s what my original post gets at: both interventionists and free-market types (to generalise horribly) have unrealistically idealistic notions, they’re just unrealistic about different things. I think the right way forward lies somewhere in-between. One needs to recognise that the second-best solution is theoretically attractive but often as politically unachievable as the first-best.

I was critisising my first comment on this post, where I said that we focus on the normative. I was thinking about it, normative stuff is the value judgements that we make, while positivist stuff is the underlying facts. I think we have a different idea on what the underlying premises are, as compared to free-marketeers. But I think our posts don’t make different value judgements than free-marketeers. As a result we focus on the positive part, but ignore normative considerations.

Is that right? In the first comment I seem to be saying that we use the same facts, but use different value judgements to arrive at different conclusions. Now that I think about it that isn’t what we do. Do you have any ideas?

This exercise is useful as it teaches us how to view public policy, and how to combat interest groups that aren’t interested in social welfare. Without this sort of normative analysis, policy would be solely dictated by interest groups.

The normative approach we take is mearly the first step in analysing policy, I doubt that we could do anything of a higher level in a blog. By using the logic of partial equilibrium analysis we can describe hypothetical situations where govternment is useful. From there it would be appropriate to look at subjective critisims of the policy and do a cost-benefit analysis of its introduction. I don’t think there is anything wrong with starting on a clean slate, as long as you realise that the actual economies you’re dealing with already have policies in place.