Market Failure in Context

Market Failure in Context. 2015. Edited by Alain Marciano and Steven G. Medema. Supplement to volume 47 of HOPE. Durham, NC: Duke University Press. 

"Market Failure in Context: Introduction," by Alain Marciano and Steven G. Medema (pp. 1–19). The contexts—social, political, and intellectual—in which discussions about market failure take place loom large, though our understanding of the roles of those contexts remains limited.

Part 1. Before "Market Failure(s)": The Failure of the Market System

"The British Tariff Reform Controversy and the Genesis of Pigou's Wealth and Welfare, 1903–12," by Nahid Aslanbeigui and Guy Oakes (pp. 23–48). The early Pigouvian inquiry into the causes of unemployment was translated into an analysis of market failure in which economics was conceived as an investigation of the conditions that improve economic welfare.

"Progressive Era Origins of the Regulatory State and the Economist as Expert," by Thomas C. Leonard (pp. 49–76). Progressive economists nearly all agreed that the best means to their several ends was social control—investigation and regulation by independent government agencies supervised by scientific experts dedicating themselves to the public good.

"Institutionalism and the Social Control of Business," by Malcolm Rutherford (pp. 77–98). In their many references to the need for new methods for the social control of business, the institutionalists clearly implied that the existing institutions of the market were inadequate to the task of guiding business activity in socially desirable directions.

"Economic Power and the Financial Machine: Competing Conceptions of Market Failure in the Great Depression," by Roger E. Backhouse (pp. 99–126). The literature in which market failure was associated with monopoly power came to be melded with ideas about the failure of the financial machine to equilibrate savings and investment.

"Analyzing Market Failure: Adam Smith and John Maynard Keynes," by Bradley W. Bateman (pp. 127–44). Smith and Keynes shared an understanding of the potential for market failure, one that defines a form of market failure that does not exist in contemporary economics.

Part 2. Market Failure: The Post–World War II Narrowing

"Paul Samuelson on Public Goods: The Road to Nihilism," by J. Daniel Hammond (pp. 147–73). Ultimately, Samuelson concluded that economic theory has little to contribute to discussions of the appropriate role of government—a conclusion he referred to as nihilistic.

"Public Goods, Market Failure, and Voluntary Exchange," by Marianne Johnson (pp. 174–98). Voluntary exchange may have faded out of the public finance literature, but it nevertheless served as the springboard for launching the modern publc goods debate.

"Sorting Charles Tiebout," by John D. Singleton (pp. 199–226). The way in which Tiebout's 1956 paper was used, invoked, and interpreted by the community crediting the paper's insight differs from how Tiebout himself viewed his work as, for instance, a contribution to spatial location theory.

"K. William Kapp's Social Theory of Social Costs," by Sebastian Berger (pp. 227–52). Kapp viewed his book The Social Costs of Private Enterprise as a continuation of his contribution to the socialist calculation debate, in which he defended the socialist position on the possibility of rational planning.

"Framing the Economic Policy Debate," by David Colander (pp. 253–66). Changes in analytic and computational technology are creating pressures for a change in the existing market failure policy frame to a policy frame broad enough to incorporate new models and insights.