Market Failures

Market failure happens whenever resources are allocated inefficiently. Franics Bator, who coined the term “market failure,” meant it to indicate conditions in which, in principle, governments might intervene in markets to improve efficiency. This video describes the main sources of market failure, including positive and negative externalities, and market failure to provide “public goods.”

Additional Readings and Videos

Here are recommended readings and additional videos that could be added to a syllabus or lesson plan on this topic.

Books and Articles

“Market Failures” by David D. Friedman (book chapter from Price Theory)
http://www.daviddfriedman.com/Academic/Price_Theory/PThy_Chapter_18/PThy_Chap_18.html

“Public Goods” by Tyler Cowen (article)
https://www.econlib.org/library/Enc/PublicGoods.html

“Public Goods and Government Action” by Jonathan Anomaly (article)
https://journals.sagepub.com/doi/full/10.1177/1470594X13505414

Joseph Heath, Morality, Competition, and the Firm
https://www.amazon.com/Morality-Competition-Firm-Failures-Approach/dp/0199990484

Peter Jaworski, “Moving Beyond Market Failure: When the Failure is Government’s”
https://businessethicsjournalreview.com/2013/02/14/jaworski-on-heath/

Joseph Heath, “Market Failure or Government Failure? A Response to Jaworski”
https://businessethicsjournalreview.com/2013/03/10/heath-responds-to-jaworski/

Joseph Heath, “A Market Failure’s Approach to Business Ethics”
http://homes.chass.utoronto.ca/~jheath/market-failures.pdf

Furton, Glenn and Martin, Adam. “Beyond market failure and government failure.” Public Choice 178, 197–216 (2019).
https://doi.org/10.1007/s11127-018-0623-4