Market failure is a situation in which the allocation of goods or services is not efficient. An efficient outcome is one that it is not possible to make someone else better off without making the other one worse off. In other words, it is the most optimal solution. When there is market failure, it is possible to make some parties better off without making the others worse off. There are various factors that trigger market failure. These factors include information asymmetry, externalities, non-competitive markets, principal-agent problems and public goods. Market failure necessitates government intervention because the market forces cannot resolve them. Therefore, it requires an external intervention to ensure that there are conducive conditions for the market to operate properly.
I believe the government should intervene. However, I believe the intervention should be guided by integrity, responsibility and community. The action taken should benefit the wider society and not a select few. The core values of Saint Leo are geared towards service to humanity and making the world a better place. I believe the government should be guided by those principles. For instance, the change of the healthcare laws so that health insurance is more affordable was a good intervention since it watches out for the welfare of society. However, I do not agree with the bailout of banks during the financial crisis. I believe banks bore the greatest responsibility of what happened. Therefore, they were to be held accountable and not given bailout funds. Besides, banks are few compared to the masses of people who suffered. The government should have used those funds to provide social welfare and spend on government projects to create employment.
References
McEachern, W. (2008). Economics: A Contemporary Introduction. London: Cengage Learning.
