market failure
Commerce produces waste
Market failure occurs when free markets fail to allocate resources efficiently, producing outcomes that don't maximize social welfare.
Classic examples include pollution (where costs fall on third parties), monopolies, and public goods like streetlights that private markets won't adequately provide.
The concept is central to economic arguments for government intervention: Carbon taxes address a market failure.
Pre-contract hidden knowledge problem
- moral hazardConsequence-free risk-taking incentive
- signalingConveying information nonverbally
- screeningEvaluative selection process
- insurance fraudDeceptive claims for payouts
Environmental harm from waste
- carbon emissionsReleased greenhouse gases
- congestionExcessive accumulation causing blockage
- secondhand smokeAmbient cigarette exhalation others inhale
- noise pollutionHarmful environmental sound
greenhouse gases · deforestation · overfishing · climate change · acid rain · ozone depletion · water contamination · biodiversity loss
Competitive impediment for newcomers
- antitrustAgainst corporate market dominance
- oligopolyFew firms dominate market
- duopolyTwo-seller market structure
- cartelPrice-fixing coalition
collusion · price fixing · predatory pricing · rent-seeking · natural monopoly · trust-busting · vertical integration
When some enjoy without contributing
- collective actionOrganized group pursuit
- national defenseProtecting a country militarily
- public broadcastingGovernment or donor-funded media
- street lightingMunicipal outdoor illumination
lighthouse · public parks · clean air · vaccination programs · basic research · open-source software · public infrastructure · common goods
Improper distribution of resources
- underproductionInsufficient manufacturing output
- overproductionExcessive manufacture beyond need
- structural unemploymentJoblessness from economic reorganization
adverse selection
Pre-contract hidden knowledge problem
- moral hazardConsequence-free risk-taking incentive
- signalingConveying information nonverbally
- screeningEvaluative selection process
pollution
Environmental harm from waste
- carbon emissionsReleased greenhouse gases
- congestionExcessive accumulation causing blockage
- secondhand smokeAmbient cigarette exhalation others inhale
noise pollution · greenhouse gases · deforestation · overfishing · climate change · acid rain · ozone depletion · water contamination · biodiversity loss · environmental degradation
barrier to entry
Competitive impediment for newcomers
- antitrustAgainst corporate market dominance
- oligopolyFew firms dominate market
- duopolyTwo-seller market structure
cartel · collusion · price fixing · predatory pricing · rent-seeking · natural monopoly · trust-busting · vertical integration
free rider problem
When some enjoy without contributing
- collective actionOrganized group pursuit
- national defenseProtecting a country militarily
- public broadcastingGovernment or donor-funded media
street lighting · lighthouse · public parks · clean air · vaccination programs · basic research · open-source software · public infrastructure · common goods
misallocation
Improper distribution of resources
- underproductionInsufficient manufacturing output
- overproductionExcessive manufacture beyond need
- structural unemploymentJoblessness from economic reorganization
- economicssupply and demand, inflation, GDP, GNP, gross domestic product
- market economicsmonopoly, oligopoly, perfect competition, duopoly, monopsony
- microeconomicsdemand, supply, supply and demand, price, elasticity
- economic problemsrecession, inflation, deflation, stagflation, hyperinflation
- law and economicsantitrust, economic analysis, legal frameworks, antitrust law, externalities
- economic policymonetary policy, tax policy, fiscal discipline, fiscal stimulus, fiscal restraint
market failureinvisible hand
Unintended societal benefit from self-interest
fail, market, failure, failing, failed, marketing, supermarket, markets, fails