Extraído de "Do We Need a Government?":
This is clearly a failure of some sort -but the examples I have given have nothing to do with markets, so why is it called market failure? A likely answer is that the concept was developed in the context of neo-classical economics. Economists generally assume that individuals are rational, that they take the actions which best serve their objectives. That suggests that if we simply let each person do what he wants, the outcome should be attractive for everyone, a suggestion that can be converted into a formal proof, an efficiency theorem showing that, under some set of simplifying assumptions, the outcome of individual choice in a market system cannot be improved even by a wise and benevolent central planner.In economic theory, market failure provides the exception to that conclusion -an exception that may arguably swallow the rule. Where one person’s acts impose costs or benefits on others that he has no reason to take account of, individual rationality cannot be expected to lead to group rationality, so there are opportunities for a wise and benevolent central planner -perhaps also for a real world government- to intervene in ways that make everyone better off. So economists are used to viewing the various forms of market failure they have analyzed -the public good problem, externalities, adverse selection -as reasons why free markets, laissez-faire, sometimes fails, hence arguments for government intervention.They are half right. Market failure is a reason why free markets sometimes fail. But it is also a reason why the alternatives to free markets, the political mechanisms proposed for correcting those failures, fail. In order for government intervention to improve on the market outcome, it is not enough that there is something government could do that would give a better outcome. There must also be a reason to expect government to do it. Putting the point in the language of economics, the incentives of the relevant political actors have to be such that it is in their interest to act in ways that result in the improved outcome.
