Nirvana Fallacy

American economist Harold Demsetz coined the term in his 1969 article "Information and Efficiency: Another Viewpoint," critiquing economic analyses that compared real institutions—such as free markets—to hypothetical perfect alternatives rather than conducting meaningful comparisons between feasible real-world options. The name references the Buddhist concept of nirvana, an unattainable state of perfect enlightenment. Demsetz's critique challenged economists who implicitly presented policy choices as between an ideal norm and an existing "imperfect" arrangement.