Nov 29 2011

Market failure versus Government failure – what should we be more concerned about?

One of the most prominent economists of the 20th century was the late Milton Friedman, an ardent free market supporter who remained skeptical of government’s ability to correct market failures through interventionist policies.

I found the talk below interesting. Friedman offers several examples of market failures that have been pointed to as a justification for government intervention, and argues that in fact, government often does not truly know what the right outcome is in most cases. He believes that government failure should be just as much a concern as market failure; and that therefore societal welfare would be best met by finding market-based solutions to the misallocation of resources that sometimes arises under conditions in which externalities exist.

As you watch the video, consider Friedman’s claims regarding the role of government, then post your response to one of the discussion questions below.

Discussion Questions:

  1. Is government better able to know the “optimal” quantity of output of different goods and services than private individuals are?
  2. Under what conditions would the free market be best able to achieve solutions to market failures such as those described by Friedman?
  3. What do you think should be of greater to concern to society, market failure or government failure?

 


About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

8 responses so far

8 Responses to “Market failure versus Government failure – what should we be more concerned about?”

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