While some useful insights follow from the assumption of an omnipotent, omniscient and benevolent policy maker, in reality it can give us very misleading ideas about the possibilities of beneficial policy intervention. It must be recognized that the actions of the state, and the feasible policies that it can choose, are often restricted by the same features of the economy that make the market outcome inefficient. (...)
For instance, if we know that markets will fail to be efficient in the presence of imperfect information, to establish the merit of government intervention it is crucial to know if a government subject to the same informational limitations can achieve a better outcome. Furthermore, a government managed by non-benevolent officials and subject to political constraints may fail to correct market failures and may instead introduce new costs of its own creation. It is important to recognize that this potential for government failure is as important as market failure and that both are often rooted in the same informational problems. At a very basic level, the force of coercion must underlie every government intervention in the economy. All policy acts take place, and in particular taxes are collected and industry is regulated, with this force in the background. But the very power to coerce raises the possibility of its misuse. Although the intention in creating this power is that its force should serve the general interest, nothing can guarantee that once public officials are given this monopoly of force, they will not try to abuse this power in their own interest.
Jean Hindriks e Gareth D. Myles, Intermediate Public Economics (p. 76)
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