{"id":10387,"date":"2014-09-29T05:00:24","date_gmt":"2014-09-29T09:00:24","guid":{"rendered":"http:\/\/marcfbellemare.com\/wordpress\/?p=10387"},"modified":"2015-05-24T11:14:11","modified_gmt":"2015-05-24T15:14:11","slug":"market-failures-%e2%89%a0-stuff-white-people-dislike","status":"publish","type":"post","link":"https:\/\/marcfbellemare.com\/wordpress\/10387","title":{"rendered":"Market Failures \u2260 Stuff White People Dislike"},"content":{"rendered":"

In economics, a market failure<\/a> is something\u00a0that\u00a0prevents a free\u00a0market from\u00a0attaining Pareto efficiency. A Pareto-efficient allocation is an allocation wherein it is not possible to make some people better off by redistributing resources without making at least someone worse off. Specific types of market failures are negative externalities (e.g., pollution, overfishing), public goods (e.g., education and vaccines), information asymmetries (e.g., adverse selection and moral hazard), fragmented or missing markets (e.g., the market for credit in developing countries), and so on.<\/p>\n

What market failures are not<\/em> is Stuff White People Dislike (SWPD). If you are not familiar with the satirical Stuff White People Like<\/a> blog, it is well worth paying a visit; the site pokes fun at educated, liberal, upper middle-class people — the yuppies of yore, which the site refers to as “white people” for short — and among its many entries, one\u00a0finds things like TED talks, the World Cup, being offended, graduate school, threatening to move to Canada, hybrid cars, Whole Foods and grocery co-ops, and so on.<\/p>\n

Why am I bringing up the obvious fact that the concept of market failure has a strict definition, and that definition is not SWPD? Because all too often, I hear people talk of “market failures” when it is obvious that they are talking about something they dislike.<\/p>\n

\"Ceci<\/a>
Ceci n’est pas une d\u00e9faillance de march\u00e9. (Source: Wikimedia Commons.)<\/figcaption><\/figure>\n

Given my research interests, I more often than not hear about SWPD-as-market-failure in the context of food and agriculture. Last summer, I was talking to a journalist who told me that the fact that food production in the US had moved away from many small farms to fewer large farms (as a consequence of increasing returns to scale, mind you) was a market failure. Likewise, I’ve heard people refer to the fact that some neighborhoods don’t have any stores selling fresh fruits and vegetables a market failure (when it could well be that stores in those neighborhoods simply don’t sell such things because\u00a0there is no demand for those goods).<\/p>\n

Here are some actual examples of people mistakenly using “market failure,” albeit not in the context of food policy:<\/p>\n