New Delhi, Jan. 20 -- Market failure is a prickly idea in economics. It exists in theory, is acknowledged in textbooks and is occasionally invoked in policy debates, but it sits uneasily with the profession's deeper instincts. To question the centrality of markets too forcefully is to invite misgivings, especially in academic publishing, where faith in markets appears more durable than the evidence that challenges it.

I recall asking my PhD supervisor Dennis C. Mueller in the 1990s why, despite empirical support to the contrary, articles in leading economics journals reflect an almost unquestioned belief in markets as efficient allocators of resources. It felt to me almost theological. Perhaps the alternative in the form of government di...