Market failures that the market doesn’t subsequently correct aren’t a big enough problem that something “needs to be done” about them, especially given the risk that government intervention will make things worse.
So, we’re back to “giving up on improving” market failures, because you don’t think they’re actually a significant problem?
Anyway, most people disagree with you here. In the real world, you’re outvoted and will lose elections, and I guarantee the above argument won’t change most people’s minds.
Do you not count something as a market failure if the market subsequently corrects it? If so, does that mean anytime someone claims that a thing is a market failure, then I get to say “Prove that the market will never subsequently correct it, or else it doesn’t count”?
Yes, I’m defining “market failures” as things that more markets don’t solve, but macroeconomics and sociology aren’t fields where such things are mathematically proven. We have to go on empirical evidence, and my interpretation of the empirical evidence is that such market failures exist and are significant.
I googled a bit, and Investopedia gives some examples:
Private market solutions: In some instances, the solution to a market failure may emerge within the private market itself. For example, asymmetrical information could be solved by intermediaries or rating agencies such as Moody’s and Standard & Poor’s informing market participants about securities risk. Underwriters Laboratories LLC performs the same task for electronics. Negative externalities such as pollution may be solved with tort lawsuits that increase opportunity costs for the polluter. Radio broadcasts elegantly solved the non-excludable problem by packaging periodic paid advertisements with the free broadcast.
How confident can you really be that no one will come up with a market solution, especially as technology advances? As mentioned, the bigger the “failure” is, the bigger the incentive for someone to fix it. And if it stays unfixed, this raises another possibility:
In some cases, the failure, and/or the absence of a market solution to the failure, is caused by government intervention. This is amusingly true of the first example the article gives of a government solution:
Government-imposed solutions: When the solution does not come from the market itself, governments can enact legislation and take other measures as a response to a market failure. For example, if businesses hire too few low-skilled workers after a minimum wage increase, the government can create exceptions for less-skilled workers.
That’s where the problem is obviously directly caused by the intervention, and the proffered solution is to reduce the intervention. But it can be less direct, and possibly be a contributor while not necessarily being the entire cause. I would say that, in any scenario where a particular market is dominated by one or a few big companies that are all misbehaving in the same way [for example, by charging above-market prices or mistreating customers in a way not justified by reduced costs], then the ideal market solution would be “I create a new company that behaves better, and makes better profits by doing so”, and then any and all governmental barriers to entry are contributing to the problem. (And any grant of monopoly obviously 100% prevents this solution.)
I would say that, for any apparent “market failure”, the contribution to it of government interventions is usually not zero, and I suspect that, the bigger and longer-term the “failure”, the larger that contribution tends to be. (Again, because bigger failures mean bigger incentives for the market to fix it.) So any analysis of a “market failure” should specifically investigate how much it is caused by government intervention.
So, we’re back to “giving up on improving” market failures, because you don’t think they’re actually a significant problem?
Anyway, most people disagree with you here. In the real world, you’re outvoted and will lose elections, and I guarantee the above argument won’t change most people’s minds.
This is probably true. Do you consider that evidence against the claim that the government’s purported solutions would make the problem worse?
Do you not count something as a market failure if the market subsequently corrects it? If so, does that mean anytime someone claims that a thing is a market failure, then I get to say “Prove that the market will never subsequently correct it, or else it doesn’t count”?
Yes, I’m defining “market failures” as things that more markets don’t solve, but macroeconomics and sociology aren’t fields where such things are mathematically proven. We have to go on empirical evidence, and my interpretation of the empirical evidence is that such market failures exist and are significant.
I googled a bit, and Investopedia gives some examples:
How confident can you really be that no one will come up with a market solution, especially as technology advances? As mentioned, the bigger the “failure” is, the bigger the incentive for someone to fix it. And if it stays unfixed, this raises another possibility:
In some cases, the failure, and/or the absence of a market solution to the failure, is caused by government intervention. This is amusingly true of the first example the article gives of a government solution:
That’s where the problem is obviously directly caused by the intervention, and the proffered solution is to reduce the intervention. But it can be less direct, and possibly be a contributor while not necessarily being the entire cause. I would say that, in any scenario where a particular market is dominated by one or a few big companies that are all misbehaving in the same way [for example, by charging above-market prices or mistreating customers in a way not justified by reduced costs], then the ideal market solution would be “I create a new company that behaves better, and makes better profits by doing so”, and then any and all governmental barriers to entry are contributing to the problem. (And any grant of monopoly obviously 100% prevents this solution.)
I would say that, for any apparent “market failure”, the contribution to it of government interventions is usually not zero, and I suspect that, the bigger and longer-term the “failure”, the larger that contribution tends to be. (Again, because bigger failures mean bigger incentives for the market to fix it.) So any analysis of a “market failure” should specifically investigate how much it is caused by government intervention.