Here.
I don't have time to comment on it right now, but I will say I'm of mixed feelings on it. I disagree with little of the positive claims they make but a lot of the normative claims they make. I'll try to elaborate later.
Market failure is in quotes in the title because the term always bugs me. I've pointed out before that it's kind of a misnomer. A market isn't failing, really. The problem in most applications is that there is no market! It seems silly to say the market fails in that case. The term is pervasive so there's no fighting it really - but I try to use terms like "externality" or "asymmetry", which are more descriptive of what's going on anyway.
David Henderson has thoughts on the post here.
Monday, April 1, 2013
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Yes, "market failure" is ambiguous. When we are talking about real markets of any complexity, show me a market success. ;)
ReplyDeleteI object to the usual use of the term "market failure" for a different reason. It seems to me that the things called market failure represent a common pattern, and one broader than markets in the conventional sense. I would like to define "market failure" as describing situations where individual rationality does not lead to group rationality. Such situations occur in markets in the ordinary sense, due to problems such as externalities, they occur in the political system, they occur within firms, they occur in battles. And the basic logic is the same in all of those cases.
ReplyDeleteAnd one can easily enough imagine failures, in ordinary markets or elsewhere, that don't fit that pattern--most obviously failures that are a result of individual irrationality.