REM 420 Lecture Notes - Lecture 4: Common-Pool Resource, Public Choice, Market Failure
6 Feb 2017
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Document Summary
In uences so much of the policy discussion of economists, is based on an analysis of the behaviour of persons in market-like interactions, essentially a positive theory of market exchanges. Economists compare the market alternative as it actually works with the governmental alternative as it might work if men / women in public choice capacities followed the precepts laid down in normative political theory. Neoclassical welfare economics, recognized as the theory of market failure. The welfare economists continue to nd aws in the workings of market exchange. For example, the deterioration in environmental quality is explained by the concept of external diseconomies, an example of market failure. A relative term; failure must be judged against an alternative. If markets fail to generate economics e ciency when measured against an ideal, this tells us nothing about the performance of markets when measured against a realizable alternative.
