The Theory of Market Failure: A Critical Examination

Rating:
Summary: Deep answers to critics of free markets
Review: Although this excellent collection was published in 1988, before the term "New Economy" came into currency, it examines ideas very relevant to the role of government during times of technological change. Recent discussions of "market failure" resulting from network effects or "externalities" have been critiqued by others, especially Margolis and Liebowitz. Cowen's collection digs deep into the economic theory of public goods, externalities, and free riding, as well as providing case studies of the successful private provision of supposedly public goods. Essays include Robert Axelrod on "The Problem of Cooperation", and Nobel Prize winner Ronald Coase, with a helpful and substantial overview by Cowen. One point running throughout the essays is that new technologies, given clear property right assigments, can solve public goods problems and that this is typically a better solution than government involvement.