Politics remains mired in ideological preconceptions of what is optimal, often landing us with bad policy. Too often we see a simplistic and false dichotomy between partisan claims that markets are the best policy tool because they are efficient, or that government should lead because this ensures equity. This is a major drag on our progress and prosperity because today’s policy challenges typically require hybrid policy solutions: sophisticated combinations of government and market tools that promote equity and efficiency at the same time.
The 20th century can be seen as a process of trial and error through which we came to understand where governments or markets were more appropriate. Libertarian, free-market capitalism collapsed in the Great Depression. The welfare state, in which government sensibly intervened to overcome market failures in sectors like health care, saved capitalism from itself.