…comes from Armen Alchian’s 1961 RAND Corp. publication Some Economics of Property, as reprinted on page 43 of the Liberty Fund edition of The Collected Works of Armen A. Alchian: Vol 2: Property Rights and Economic Behavior [original footnote]:
I should, I suppose, avow at random intervals that all this is not a condemnation of public ownership any more than certain “deficiencies” of marriage, the human eye, the upright position of the human being, or smoking are to be regarded as condemnations of marriage, eyes, walking on two feet, or smoking. The “lesser” evils in some institution – and they exist in all – are borne for the greater good in some of them. We are not arguing that private property even in its purest form is perfect in the cost-bearing sense. No standard of perfection is available. All of our statements have been comparative in degrees of cost bearing.
The converse of this “apologia” is that others should not speak of the imperfections of the marketplace, either. Nor should they assume that in those instances where the marketplace is inferior in certain respects to, say, public ownership or government control, we should switch from the market to the government.* The presence of one kind of relative deficiency does not simply justify a switch to another agency which has other kinds of deficiencies. We can’t have either agency without also having all its attributes. We repeat that this neither justifies nor condemns more private or more public ownership, more market- or more government-directed activity. All this may help form such decisions, but it is only part of the story.
*We are mindful that rabbits have greater skin-healing power (even for some especially large [100cm^2] sizes of skin injury) than do human beings. Should we deduce that rabbits should be used as soldiers?
Alchian’s point is an important one, but one oft-lost, even among economists: there are no solutions, only trade-offs. Everything is subject to the question “as compared to what?” There are no silver bullets and institutions form in response to their surroundings (and their surroundings respond to the institutions). The mere fact a given institution has deficiencies is not a reason to replace it; its replacement will also have deficiencies.