I think the term “Market Failure” describes an interesting phenomenon and there should be some term that describes situations where negative externalities are being generated, there is suboptimal production of a social good, etc. At the same time, it is easy to see how “market failure” easily gives laypeople additional connotations.
Specifically, I agree that this phenomenon generalizes beyond what most people think of as “markets” (i.e. private firms doing business). I can see where this would bias most peoples’ hasty analysis away from potential free-market solutions and towards that status quo or cognitively-simple solutions (“we just ought to pass a law! Lets form a new agency to enforce stricter regulations!”) without also taking the time to weigh the costs of those government interventions.
In some spaces, there are private self regulatory organizations, consumer watchdogs, civil liability, and licensing firms that can align firms closer towards socially optimal outcomes while having a greater incentive than the government to pay attention to the costs of those “regulations.” But otherwise there’s not really a market for law and regulation itself within the borders of any one country.
In short, I fear many people perceive the words “market failure” as a local condemnation of capitalism and free markets when perhaps the better solution to these “market failures” is making more market in the form of a more responsive and accountable ecosystem of firms performing the currently monopolistic regulatory function of government.
I think the term “Market Failure” describes an interesting phenomenon and there should be some term that describes situations where negative externalities are being generated, there is suboptimal production of a social good, etc. At the same time, it is easy to see how “market failure” easily gives laypeople additional connotations.
Specifically, I agree that this phenomenon generalizes beyond what most people think of as “markets” (i.e. private firms doing business). I can see where this would bias most peoples’ hasty analysis away from potential free-market solutions and towards that status quo or cognitively-simple solutions (“we just ought to pass a law! Lets form a new agency to enforce stricter regulations!”) without also taking the time to weigh the costs of those government interventions.
In some spaces, there are private self regulatory organizations, consumer watchdogs, civil liability, and licensing firms that can align firms closer towards socially optimal outcomes while having a greater incentive than the government to pay attention to the costs of those “regulations.” But otherwise there’s not really a market for law and regulation itself within the borders of any one country.
In short, I fear many people perceive the words “market failure” as a local condemnation of capitalism and free markets when perhaps the better solution to these “market failures” is making more market in the form of a more responsive and accountable ecosystem of firms performing the currently monopolistic regulatory function of government.