Market Failure

Market Failure a. Define market failure from the perspective of the economist and government failure from the perspective of the political scientist (recall public choice theory) From an economist perspective, market failure is when goods or services are not purchased by the customers, and the active premarket condition is not available for the market. Moreover, there is a lack of optimum allocation of resources within the market. Influential individuals within the market can make use of the available loopholes. This may be due to several reasons such as the existence of a monopoly in the market. A market characterized by oligopoly structure is considered to be a failure since it has too many players who deal with similar products. From the political scientist perspective, government failure is a state where government involvement in the economy in an aim to rectify a market failure worsens the situation by creating inefficiency and contributing to misallocation of the scarce resources. It can also be defined as a period when a government’s action becomes worse rather than better, for example when it passes laws that require businesses taxatio …