The key question of public policy

The key question of public policy is this: at the margin, do we want more allocation by markets or more by governments? Arnold Kling does a fine job of explaining the side I take:

Market failure tends to be self-correcting, because entrepreneurs have incentive to fix things. For government failure to be corrected, somebody needs the insight to know how to correct it and they need to overcome the political opposition to changing the system. In practice, the change does not happen. You cannot get rid of the mohair subsidy.

. . . It is not just that special interests can gum things up. It is that however things get gummed up, they are persistently gummed up in an institution that is insulated from market competition.

Oh, and look, thanks to Todd Zywicki, we just happen to have a wonderful example at hand. Can you name a business that gets an average of $1472 for its product but that has an average cost as low as $99? (Hint: it's not Microsoft software. The margin in this business puts Microsoft to shame.) Whether you can or not, you might want to read how this situation comes about.