Interventionists usually dismiss the case for laissez-faire by saying that it depends on perfectly competitive markets, which hardly ever exist, and therefore we need widespread government intervention in the economy, such as minimum-wage laws, antitrust enforcement, and so on.

Responding to a recent talk by Harvard’s Jason Furman, economist Arnold Kling does a masterly job of showing what is wrong with what he calls a “straw-man argument against libertarianism”:

This argument constantly emanates from economists of Harvard and MIT and their disciples. Students and journalists, who are inclined to resent markets and despise libertarians, feel vindicated when they hear this argument. They come away believing that markets are never any good, even when professors who teach this way, like Jason Furman, are less dogmatically anti-market.

He’s right. Great numbers of students and people who regard themselves as intellectually sophisticated have heard something like Furman’s case against free markets and swallowed it whole. No further thinking needed. Laissez-faire is a simpleton’s answer, but we are too smart to accept it.

Kling responds,

I readily concede that the market economy is not at some theoretical optimum. The question is what will lead to improvement. I believe that government intervention will often make things worse. Meanwhile, entrepreneurial innovation and creative destruction tends to solve economic problems, including market failures.

To which I’d add that politicians and bureaucrats don’t know how to solve market problems, and their incentives often cause them to make those problems worse.

Read the whole thing.

Hat tip: Don Boudreaux