Econ 1: Spring 2016: U.C. Berkeley: The Market Economy: Con
"Therefore shall ye lay up these my words in your heart and in your soul, and bind them for a sign upon your hand, that they may be as frontlets between your eyes. And ye shall teach them your children, speaking of them when thou sittest in thine house, and when thou walkest by the way, when thou liest down, and when thou risest up. And thou shalt write them upon the door posts of thine house, and upon thy gates..."
Ten modes of "market failure":
Markets can go wrong--badly wrong. They can:
- not fail but be failed by governments that fail to properly structure and support them—or that break them via quotas, price floors/ceilings, etc.
- be out-of-equilibrium
- see actors have market power
- be afflicted—if that is the word—by non-rivalry (increasing returns to scale; natural monopolies)
- suffer externalities (in production and in consumption, positive and negative; closely related to non-excludibility)
- suffer from information lack or asymmetry
- suffer from maldistributions—for the market will only see you if you have a willingness to pay, which is predicated on an ability to pay…
- suffer from non-excludability (public goods, etc.)
- suffer from miscalculations and behavioral biases
- suffer from failures of aggregate demand