Economics of Market Failure

Market failure has become an increasingly important topic for students. Simply put, when the market does not bring economic efficiency, there will be a market failure. Government intervention in the market has some form of market failure, but this is a clear economic case. The government can prove this by saying that intervention is for public interest. Government intervention occurs when the market does not work optimally, that is, when there is an optimal allocation of resources below the Pareto in the market / industry.

Although the market does not necessarily bring economic interests. If the market leads to inefficient resource allocation, market failure will occur. In some markets there are several market failures in the market, but there are over production or overproduction. In the real world, optimality (or optimal welfare) has not been achieved due to many constraints in perfect competition. These will lead to market failure. Therefore, market failure refers to a situation where the market can not allocate resources efficiently. These arguments are as follows. (Jhingan, 2007)

The core of environmental economics is the concept of market failure. Market failure means that the market can not allocate resources efficiently. As Hanley, Shogren and White (2007) wrote it in their textbook "Environmental Economics", "If the market does not allocate scarce resources to create the greatest social benefit, market failures will occur The society may wish to make him or her do something to protect the environment.This wedge means wastefulness or economic inefficiency; to improve at least one of the resources "The general form of market failure includes externality, non-exclusive, non-competitive.