The term “nirvana fallacy” was first used by the economist Harold Demsetz to describe the comparison of real markets to ideal government institutions lacking imperfection. Such a comparison leads to the conclusion that government intervention is required to overcome the failures of markets. Flawless government intervention is desirable when compared to imperfect market outcomes.
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A similar fallacy often applies to reconstruction efforts. In the context of reconstruction, a nirvana fallacy occurs when it is assumed that, in the face of a weak, failed or illiberal government, external occupiers can provide a better outcome relative to what would exist in the absence of those efforts. This is not to say that reconstruction efforts can never have beneficial effects, but neither can it be assumed that occupation will yield beneficial outcomes.
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