In a free market, there is no such thing as a market failure. There is only a perception of failure, when the outcome is not what someone would wish or expect. Free market cannot fail , it just is.
Market Failure is a technical term used in economics to refer, in part, to non-internalized externalities created as a by-product of the production of goods and services. Pollution would be one example. Without some institutional intervention, and in the presence of imperfect property rights and transaction costs, neither the producer, nor the consumer would necessarily bear the total cost to society of the pollution produced as a by-product of production.
However, if we take a very broad view of the free market then your statement might be true. In this broad view, classical liberalism, socialism, constitutional democracy, communism are all free market outcomes. The free market then, broadly defined as collective individual action, encompasses capitalism, socialism, and other social conventions. As I have said in another setting, “markets are never right and always correct.” What that means is that allowing the market the freedom to move into error is absolutely necessary for advancing knowledge and the material well being of mankind.
I think a more robust view of the free market recognizes and that we do not know, a priori, which set of political, cultural, and technical practices will produce the highest state of utility. As such, the market is a product of disequilibrium, i.e. the fact that we do not have total and accurate knowledge dictates its existence. It is simply the process by which individual knowledge, derived through any means, is disseminated and adopted by society and becomes part of the collected wisdom of mankind. |
