Transaction costs determine whether government’s involvement is necessary, but the issue is more complicated. My professor, Xiao Geng, used to say that the transaction cost for a market to build up a rocket is too high, and that’s why the government needs to participate. My question in mind is ‘why do we need a rocket in the first place?’ As one may see, we are already talking about SUBJECTIVE value: the need to build a rocket.
While I agree that economic analysis can be and should be as OBJECTIVE as possible (Positive Economics), policy recommendation (Normative Economics) can never be and is NOT SUPPOSED to be OBJECTIVE. Take Milton Friedman for example. As an economist, he is top class and his analysis is based on empirical evidence (objective approach). However, as an policy advisor, he is obviously in favor of a society that individuals have choices. I doubt if he would ever support the idea of building a rocket under central planning.
For people working in the policy recommendation field, we just cannot deny that we have certain values when proposing policies. I personally treasure individuals’ choices and productivity. Others who embrace income equality as their top priority would reject my recommendation simply because of the difference in values. This kind of values is rather SUBJECTIVE and under much influence from our personal experience and belief. Having said that, values can still be changed under new experience and ideas.
Any outstanding policy advisors probably need both outstanding scientific analysis (OBJECTIVE) and sound value judgement (SUBJECTIVE).