This is the Cato Daily Podcast for Tuesday, January 22nd, 2019. I'm Caleb Brown.

The Market Failure Framework presents avenues for new government

failures that often come along with intervention.

Cato's Ryan Bourne is author of a new paper,

how market failure arguments lead to misguided policy available today.

When people have identified some problem in the private sector,

they often throw out the words market failure.

And what does a market failure mean technically in, you know, from our years of economics literature what does that mean?

Well the origins of the term market failure came about from a very specific academic

literature in the 1950s and that's pretty much how politicians and lots of policy advocates seem to use it today,

which is broadly that if a market fails to comply with the tenants of a perfectly competitive market if it's not got perfect

information if there's not large numbers of firms competing if there's any

externalities or transactions costs, then a market is said not to be perfectly competitive.

So what you get in a lot of policy debates these days is that people identify what they perceive to be a problem with the market.

They'll say something like, oh, there aren't many firms in that market,

it's oligopolistic or monopolistic.

There's an externality.

This activity is causing pollution or is causing effects of harm to others.

Ergo there's a market failure which the government then must intervene to correct. And the underlying assumption there

is that the government can step in perfectly

to correct that failure.

Yeah, so leaving aside whatever government intervention

...