A short critique of the concept of 'market failure'

The 20th IEA Discussion Paper is a short introduction to ‘market failure’. This economic concept provides the intellectual justification for all manner of government intervention. Yet the idea of market failure is deeply flawed, particularly when it comes to its practical application in public policy.

Professor Booth argues that governments are not perfect and generally do not possess adequate knowledge to correct market failure. They also suffer from ‘government failure’, as policy may be influenced by the special interests of politicians, bureaucrats and lobby groups.

2008, Discussion Paper 20

For more on government failure and public choice theory, see The Vote Motive by Gordon Tullock.

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