Modes of Market Failure
At lunch last week Richard Thaler was skeptical that I had managed to identify ten different modes of market failure. I admit that this list has a little too much of the Borges-List Nature, but I do think it holds up. What do you think?: The Market Economy: Modes of Failure: Markets can go wrong—badly wrong. They can:
not fail, but be failed by governments, that do not properly structure and support them—or that break them via quotas, price floors/ceilings, etc....
be out-of-equilibrium...
possess 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...
#berkeley #economics #highlighted #marketfailure
