Most introductory economics textbooks have a section on “market failure.” It is here that students learn that markets may fail to achieve their potential – leaving people worse off than they theoretically could be. The existent of market failure is often taken as an excuse for government intervention to do whatever markets fail to do. In just a couple of sentences, explain why economists (and others, particularly politicians) must accept the possibility of “government failure” as well? That is, tell me why government solutions to perceived market “failures” may themselves fail to achieve their own stated goals? The U.S. Drug war is an apt example of a discrepancy between a stated political policy goal and the actual attainment of that goal?

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The structure of market systems contributes to market failure In the real world it is not possible f... View the full answer