5 Market Failure and the Second Fundamental Theorem of Welfare Economics

2020 ◽  
pp. 79-96
Keyword(s):  
Fundamental Theorem ◽  
Market Failure ◽  
Welfare Economics

Economic Theory and Urban Planning

1975 ◽  
Vol 7 (5) ◽  
pp. 497-508 ◽  
Author(s):  
M J Oxley
Keyword(s):  
Economic Theory ◽  
Urban Planning ◽  
Theoretical Basis ◽  
Market Failure ◽  
Welfare Economics ◽  
Perfect Competition

The lack of a theoretical basis for urban planning is stressed. It is suggested that welfare economics could provide the means for analysing the problems and a framework for developing alternative courses of action. This is achieved by examining the concept of welfare optimisation, the optimality of perfect competition, and the nature of market failure.

scholarly journals Una crítica a la teoría de los fallos del mercado desde la perspectiva de la Escuela Austriaca

2021 ◽  
pp. 133-159
Author(s):  
Ángel Martín Oro
Keyword(s):  
Public Goods ◽  
Imperfect Competition ◽  
Market Failure ◽  
Welfare Economics ◽  
Perfect Competition ◽  
Market Failures ◽  
Failure Theory ◽  
Palabras Clave ◽  
Competitive Model ◽  
Main Criticism

In this paper, we present a critical analysis of the standard market failure theory, one of the most important pillars of economic interventionism. This theory justifies state interference when markets do not produce so-called optimal outcomes; being based on two fundamental concepts of neoclassical welfare economics, namely, Pareto efficiency and perfect competition. The main criticism is directed at the theoretical framework in which is based on, through the contributions of the Austrian School of Economics. To accomplish that, after revising the basics of the market failure theory, we will put forward an alternative concept of efficiency, as well as questioning the suitability of the perfect competitive model. Next, we will reconsider theoretically the traditional market failures, that is, monopolies, public goods and externalities’ problems. This analysis is accompanied by historical cases that illustrate our criticism. Key words: Market failure, welfare economics, efficiency, imperfect competition, public goods, externalities. JEL codes: B53, D60, H00. Resumen: En este trabajo se realiza un análisis crítico de la teoría tradicional de los fallos del mercado, uno de los pilares más importantes del intervencionismo económico. Esta teoría vendría a justificar la interferencia estatal en los casos en que el mercado no produce resultados óptimos; estando apoyada en dos conceptos fundamentales en la economía del bienestar neoclásica: la eficiencia paretiana y el modelo de competencia perfecta. La principal crítica se realizará al marco teórico en el que se inserta, a partir de las aportaciones de la Escuela Austriaca de Economía. Para ello, tras describir a grandes rasgos la teoría de los fallos del mercado, expondremos un concepto alternativo de eficiencia, y nos cuestionaremos la validez teórica del modelo perfectamente competitivo. A continuación, reconsideraremos desde un punto de vista teórico los fallos del mercado tradicionales, esto es: monopolios, bienes públicos y externalidades. Este análisis se acompañará de casos históricos que ilustren y apoyen nuestra crítica. Palabras clave: Fallos del mercado, economía del bienestar, eficiencia, competencia imperfecta, bienes públicos, externalidades. Códigos JEL: B53, D60, H00.

Business Ethics and Equality

2018 ◽  
Author(s):  
Abraham A. Singer
Keyword(s):  
Social Justice ◽  
Business Ethics ◽  
Fundamental Theorem ◽  
Market Failure ◽  
Market Failures ◽  
Second Best ◽  
Corporate Executives ◽  
Market Failures Approach

This chapter shows why concerns for equality must affect business ethics. In the last chapter, we saw that the market failures approach takes the theory of second best seriously when it comes to the first fundamental theorem; however, it does not seem to apply it to its own reliance on the second fundamental theorem. Just as we ask corporate executives to constrain and restrain themselves according to the spirit of efficiency-promoting laws in order to achieve second-best efficiency, market actors ought to shoulder some of the burden of justice in order to achieve second-best social justice. To this end this chapter introduces the concept of “justice failure” as a concept parallel to “market failure” and sketches out what a justice failures approach to business ethics would look like. The chapter concludes by responding to potential objections.

From market failure paradigm to an institutional theory of environmental governance

2009 ◽  
pp. 87-101
Author(s):  
Jouni Paavola
Keyword(s):  
Public Goods ◽  
Institutional Theory ◽  
Environmental Governance ◽  
Market Failure ◽  
Institutional Economics ◽  
Welfare Economics ◽  
Environmental Conflicts ◽  
Physical Setting ◽  
Jel Classifications

- This manuscript examines how an institutional theory of environmental governance might be based on a re-interpretation and re-working of the arguments of the market failure paradigm and its main criticisms. The manuscript first examines in detail the arguments of the market failure paradigm regarding externalities and public goods, as well as their criticisms. The paper then suggests an institutional re-interpretation and revision of the key arguments of the market failure paradigm. The institutional theory of environmental governance acknowledges the interdependence of economic actors and the resulting fundamental role of conflicts as the rationale for environmental governance and its institutions. As environmental conflicts are primarily a matter of distribution rather than of efficiency, it becomes important to understand the likely consequences of institutional alternatives in the specific socio-economic and physical setting of the environmental conflicts, and the degree to which these consequences match with the pertinent social or economic goals.Keywords: environmental governance, market failure, externalities, public goods, welfare economics, institutional economicsJEL classifications: Q50; H41; D62; B52

Government Supply and Government Production Failure: A Framework Based on Contestability

1990 ◽  
Vol 10 (1) ◽  
pp. 1-22 ◽  
Author(s):  
Aidan R. Vining ◽  
David L. Weimer
Keyword(s):  
Policy Analysis ◽  
Conceptual Framework ◽  
Market Failure ◽  
Analytical Framework ◽  
Welfare Economics ◽  
Market Failures ◽  
Positive Theory ◽  
Traditional Market ◽  
Government Production

ABSTRACTA complete conceptual framework for policy analysis requires a theory of government supply and government production failure to complement the well-developed theory of market failure provided by welfare economics. Charles Wolf has made an important start by attempting to draw parallels between market failures and the manifestations of government supply failures. This article provides a more useful analytical framework for government supply failure in two important ways. First, it draws on several perspectives from the economics of organization to sketch both normative and positive theories of government supply. Second, it uses the positive theory of government supply behavior to make direct comparisons with the traditional market failures. It concludes with some implications of the framework for assessing the potential gains from privatization.

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