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Market Failure

Occurs when the outcome in a free market is not efficient, meaning that there is another possible outcome where scarce resources are allocated in a way that creates greater net benefits. Many economists and politicians view a market failure as grounds for economic intervention by the government.

Steve Horwitz - Regulation and Intervention

Mark Hendrickson - The Truth About Monopoly and Antitrust

Related Publications

ARTICLE

Elinor Ostrom's Nobel Prize in Economics

Why Those Who Value Liberty Should Rejoice

OCTOBER 15, 2009

Elinor Ostrom is the first woman to win the Nobel Prize in Economic Sciences. She is also one of the most iconoclastic thinkers to win the prize. Professor Ostrom's work focuses on the mechanisms of self-governance that operate in different societies.

ARCHIVE

Are Medical Markets an Inherent Failure?

AUGUST 05, 2009 by WILLIAM ANDERSON

From an economic point of view, a scarce good is a scarce good, whether it is medical care or sirloin steak. The problem is that government has piled intervention on top of intervention, and driving up the costs and making care less available in the process.

ARTICLE

TGIF: Government Failure

by Sheldon Richman

OCTOBER 05, 2007 by SHELDON RICHMAN

Related Freeman Articles

WABI-SABI

JPMorgan’s Blunder Is No Market Failure

Imperfect knowledge is not an argument for government oversight.

MAY 15, 2012 by SANDY IKEDA

Neither losses from error nor profits from good decisions are grounds in themselves for tighter regulation.

THE CALLING

The Failure of Market Failure

How about government failure?

DECEMBER 08, 2011 by STEVEN HORWITZ

Which process has better built-in mechanisms to provide the knowledge and incentives necessary to notice imperfections and improve on them?

IT JUST AIN'T SO

Uneven Information Causes Market Failure?

Market-Failure Arguments Ignore Incentives for Market Participants to Overcome Assymetric Information

DECEMBER 01, 2007 by JOSHUA C. HALL

IT JUST AIN'T SO

Regulations Improve the Free Market?

The Source of Most "Market Failures" Can Be Traced to Government

NOVEMBER 01, 2005 by ARTHUR FOULKES

Despite its remarkable record the free market remains for many people a tough sell. Even those who on balance support free enterprise hesitate to give unregulated market forces their full endorsement.

Related Multimedia

MULTIMEDIA - VIDEO

Regulation and Intervention

NOVEMBER 14, 2012 by STEVEN HORWITZ

Should governments regulate and intervene to correct "market failures?"

Steve Horwitz explains the dynamics of interventionism and the issues with regulating and intervening in the free market.

"What regulation and intervention do is prevent markets from discovering new ways of solving existing problems and new ways of solving new problems. When regulation erects barriers to entry or other kinds of limits on market behavior, it cuts short this discovery process, and that leads to inefficiency and waste of resources."

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November 2014

It's been 40 years since F. A. Hayek received his Nobel Prize. His insights, particularly on the distribution of knowledge and the impossibility of economic planning, remain hugely important today. In this issue, we look back on the influence of his work. Max Borders and Craig Biddle debate whether liberty must be defended from one absolute foundation, further reflections on Scottish secession, and how technology is already changing our world for the better--including how robots, despite the unease they cause, will only accelerate this process.
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