from The Library of Economics and Liberty, How We Failed Our Economics Students and Caused Low Government Approval Ratings by Russell S. Sobel:
The “nirvana fallacy” is the logical error of comparing actual things with unrealistic, idealized alternatives. For instance, some might see a problem in the current health care system and propose that because of this, we should have a government-run health care system, based on the logic that this ideal government-run system would overcome all the problems. This tendency to idealize the outcomes of potential future government policies and programs is a persistent bias in public perception of government and in government policy-making. No wonder this leads to widespread disappointment with the actual outcomes of government!
Only through careful thought about real-world alternatives, by comparing the likely true limitations of both the private and public sectors, can good judgments about policy be made. Assuming some benevolent government will institute quick and perfect Keynesian business cycle corrections that maintain full employment, or that government provision or regulation will result in ideal outcomes in other markets, leads to unwise policy making—and to public displeasure with the outcomes of government. It even leads some young individuals into believing that an entirely government-run economic system (e.g., socialism) controlled by democracy would magically work better than our current economic system to solve all our problems.