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The failure of market failure

New Labour economics, in both private and public sectors, is based on the idea of market failure. But the doctrine smuggles in too many neoliberal assumptions, and does not acknowledge collective choices. The centre-left needs something better

By John Kay   August 2007

Does the modern centre-left have an economic theory? It has come, reluctantly, to acknowledge the primacy of the market, but demands intervention to reduce inequality of outcomes and to improve equality of opportunity. The most articulate rationale for this economic philosophy is the doctrine of market failure. This notion was the centrepiece of Gordon Brown’s most extended exposition of economic philosophy, a speech to the Social Market Foundation in 2003. The argument was then amplified in a book published a year later, entitled Microeconomic Reform in Britain. (The status of this volume, part economic treatise, part political tract, is curious.…

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