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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: frankw1900 who wrote (12349)	12/2/2001 10:11:12 AM
From: Hawkmoon	Read Replies (1) \| Respond to of 281500

please define 'private market failure Now see, you made me have to regress back a decade or so, forcing me to find some definitions that would match those once offered by my old University of Chicago trained professor of "political economy" (define that one.. :0) But I found this definition for you that I'm sure he'd approve of: Market Failures: when the pursuit of private interest does not lead to an efficient distribution of society's resources; situations where individual behavior does not lead to Pareto efficiency. clas.ufl.edu "Private" market failure is merely another term for the above. But an example of which that is readily offered would be the public interstate system. There was a genuine argument by the "Adam Smiths" of their time, that all the highways should be privately built, and funded through the collection of tolls. Unfortunately, their was little efficiency in having everyone stop at a tool booth every couple of miles or so to pay an attendent. So the Government stepped in and declared the interstate system a "public good" that should be open for everyone to utilize. Another example would be those areas of R&D where government spending on high technology has led to social advances that the private market would not have been incentivized to create. Examples of this would be Jet powered commercial airliners, and/or the space program (with all of their technological spin-off products). With regard to international trade, market failure occurs when trade is not both fair and free. Smith was writing about two separate nations manufacturing a similar good but choosing to protect their own local markets. He was not referring to how government was using it's regulatory power to subsidize their own favored industries over those of the competing nation. Adam Smith would CERTAINLY disapprove of the Canadian government owning some 90% of Canadian timber land, and selling it below market value to private companies who export it, but may have little interest in renewing that resource (leaving it to the government to do so). And he would probably consider a government selling a publicly owned asset for cut rate prices to be a crime, and if sold into another, more private, market more reflective of true market value, to be an act of economic war. Hawk