Market Failure or Success

The New Debate

Author: Tyler Cowen and Eric Crampton Series: In Association with the Independent Institute

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Recent years have seen the development of new theories of market failure based on asymmetric information and network effects. According to the new paradigm, we can expect substantial failure in the markets of labour, credit, insurance, software, new technologies and even used cars, to give but a few examples. Market failure at the microeconomic level may even create or aggravate macroeconomic disturbances. This title brings together the key papers on the subject, including classic papers by Joseph Stiglitz, George Akerlof and Paul David, along with powerful theoretical and empirical rebuttals. The rebuttals challenge the assumptions of the new models and question the usual policy conclusions. Examination of real markets and careful experimental studies fail to verify the new theories. New frontiers for research are suggested.

About the Author

Edited by Tyler Cowen, Professor of Economics, George Mason University, Director, Mercatus Center and Director, James Buchanan Center for Political Economy, US and Eric Crampton, Chief Economist, The New Zealand Initiative