Editing Economics (section)

=== Market failure ===
{{Main|Market failure}}
{{see also|Government failure|Information economics|Environmental economics|Ecological economics|Agricultural economics}}
[[File:Smokestack in Detroit.jpg|thumb|[[Pollution]] can be a simple example of market failure; if [[costs of production]] are not borne by producers but are by the environment, accident victims or others, then prices are distorted.|alt=A smokestack releasing smoke]]
[[File:Field Trip- water sampling.jpg|thumb|An [[environmental scientist]] sampling water|alt=A woman takes samples of water from a river.]]
The term "[[market failure]]" encompasses several problems which may undermine standard economic assumptions. Although economists categorise market failures differently, the following categories emerge in the main texts.{{efn|Compare with [[Nicholas Barr]] (2004), whose list of market failures is melded with failures of economic assumptions, which are (1) producers as price takers (i.e. presence of oligopoly or monopoly; but why is this not a product of the following?) (2) equal power of consumers (what labour lawyers call an imbalance of bargaining power) (3) complete markets (4) public goods (5) external effects (i.e. externalities?) (6) increasing returns to scale (i.e. practical monopoly) (7) perfect information (in {{cite book |title=The Economics of the Welfare State |url=https://books.google.com/books?id=gWxfQgAACAAJ&pg=PP1 |edition=4th |year=2004 |publisher=Oxford University Press |isbn=978-0-19-926497-1 |pages=72–79}}).<br />&nbsp;&nbsp; • [[Joseph E. Stiglitz]] (2015) classifies market failures as from failure of competition (including [[natural monopoly]]), [[information asymmetries]], [[incomplete markets]], [[externalities]], [[Public good (economics)|public good]] situations, and [[macroeconomic]] disturbances (in {{cite book |title=Economics of the Public Sector |chapter-url=https://books.google.com/books?id=miPeCgAAQBAJ&pg=PP1 |edition=4th International Student |year=2015 |publisher=W.W. Norton & Company |isbn=978-0-393-93709-1 |pages=81–100 |chapter=Chapter 4: Market Failure}}).}}

[[Information asymmetries]] and [[incomplete markets]] may result in economic inefficiency but also a possibility of improving efficiency through market, legal, and regulatory remedies, as discussed above.

[[Natural monopoly]], or the overlapping concepts of "practical" and "technical" monopoly, is an extreme case of ''failure of competition'' as a restraint on producers. Extreme [[economies of scale]] are one possible cause.

[[Public goods]] are goods which are under-supplied in a typical market. The defining features are that people can consume public goods without having to pay for them and that more than one person can consume the good at the same time.

[[Externalities]] occur where there are significant social costs or benefits from production or consumption that are not reflected in market prices. For example, air pollution may generate a negative externality, and education may generate a positive externality (less crime, etc.). Governments often tax and otherwise restrict the sale of goods that have negative externalities and subsidise or otherwise promote the purchase of goods that have positive externalities in an effort to correct the price [[distortions (economics)|distortions]] caused by these externalities.<ref>{{cite encyclopedia |author-link=Jean-Jacques Laffont |last=Laffont |first=J.J. |date=1987 |dictionary=The New Palgrave Dictionary of Economics |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |pages=263–265 |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X000773 |doi=10.1057/9780230226203.2520 |isbn=978-0-333-78676-5 |chapter=Externalities |access-date=16 October 2017 |archive-date=16 October 2017 |archive-url=https://web.archive.org/web/20171016230115/http://www.dictionaryofeconomics.com/article?id=pde1987_X000773 |url-status=live }}</ref> Elementary demand-and-supply theory predicts equilibrium but not the speed of adjustment for changes of equilibrium due to a shift in demand or supply.{{sfn|Blaug|2017|p=347}}

In many areas, some form of [[price stickiness]] is postulated to account for quantities, rather than prices, adjusting in the short run to changes on the demand side or the supply side. This includes standard analysis of the [[business cycle]] in [[macroeconomics]]. Analysis often revolves around causes of such price stickiness and their implications for reaching a hypothesised long-run equilibrium. Examples of such price stickiness in particular markets include wage rates in labour markets and posted prices in markets [[Imperfect competition|deviating]] from [[perfect competition]].

Some specialised fields of economics deal in market failure more than others. The [[economics of the public sector]] is one example. Much [[environmental economics]] concerns externalities or "[[public bad]]s".

[[Policy]] options include regulations that reflect [[cost–benefit analysis]] or market solutions that change incentives, such as [[Emissions trading|emission fees]] or redefinition of property rights.<ref>{{unbulleted list citebundle
|1 = {{cite encyclopedia |last1=Kneese |first1=Allen V. |first2=Clifford S. |last2=Russell |date=1987 |dictionary=The New Palgrave Dictionary of Economics |edition= |editor-first1=John |editor-last1=Eatwell |editor-first2=Murray |editor-last2=Milgate |editor-first3=Peter |editor-last3=Newman |pages=159–164 |chapter-url=http://www.dictionaryofeconomics.com/article?id=pde1987_X000715 |doi=10.1057/9780230226203.2480 |isbn=978-0-333-78676-5 |chapter=Environmental economics |author1-link=Allen V. Kneese |access-date=16 October 2017 |archive-date=30 December 2010 |archive-url=https://web.archive.org/web/20101230143754/http://www.dictionaryofeconomics.com/article?id=pde1987_X000715 |url-status=live |doi-access=free }}
|2 = {{harvp|Samuelson|Nordhaus|2010|loc=ch. 18, "Protecting the Environment."}}
}}</ref>