Abstract: | A theory of public policy cannot be based solely on the theory of market failure. It also requires a theory of nonmarket (or government) failure, argues the American economist Charles Wolf, Jr. In an important article from 1979 Wolf presents the outlines of such a theory of nonmarket failure. The present article critically discusses Wolfs theory and tries to demonstrate that even his theory is not sufficiently adequate. One point made is that nonmarkets cannot be directly compared to markets since they do not represent one elemental decision process, as markets do. A nonmarket is a composite decision system. Another point that is advanced is that there are more decision systems than markets and nonmarkets, and that a complete theory of public policy must reflect this fact. Here two such additional systems are suggested: cultures and networks. |