I think you have to try and distinguish a concept of "market failure," which may have a technical meaning for certain types of transactions, from a dislike of a market result.
As said below, market failure presumes the notion of market success, which in turn presumes the ability to judge success by some standard other than the market, which creates the problem of how do diverse persons agree on a success standard that is something more than the subjective judgment of whoever is doing the judging. For example, I could decide that everybody deserves a 4000 sq. ft. house on a golf course, and say market failure , because the market does not provide such housing. Calling that a "market failure" would be a misnomer. What I am really saying is that I don't like the market result. In the example below, Eugene assumes that the drug should be developed and made available. I am sure he could embellish the facts so that we all could agree, in the abstract, we would like to see the drug developed and made available. But our agreement that it would be nice does not mean the drug ought to be developed. The market is providing information saying the drug should only be developed if a pill is $5.00, but such a price is impossible to obtain under the existing market rules. That is not market failure -- it is simply information that you may not like. The fact that a change in the market rules (i.e. patent protection) may make the pill worth developing is not a reflection on the market one way or the other. David Shemano -----Original Message----- From: [email protected] [mailto:[email protected]] On Behalf Of Shane Mage Sent: Friday, January 27, 2012 5:21 PM To: Progressive Economics Subject: Re: [Pen-l] what is "Market Failure"? On Jan 27, 2012, at 2:45 PM, Eugene Coyle wrote: > What is the definition of "Market Failure"? > > > Specifically, is the following Market Failure or something else? > > Consider a pharmaceutical company which develops a drug after the > expenditure of say $1 billion and is able to produce a daily dose for > 50 cents. The company considers the volume to be sold and > realizes that it must get, say, $5.00 per pill to make a profit. > The formula for the pill is public. Without a patent on the drug it > can't sell for $5.00, so it needs patent protection to be profitable. > > Is the need for patent protection "market failure" or is that > something else? > > If something else, what is that called? The notion of 'market failure" presumes the notion of "market success," and that notion would be valid only if the market were capable, under capitalism, of benefiting the people. But this is impossible because only perfectly competitive markets are, in bourgeois theory, of benefit to society. In reality capitalist markets are monopolistic. Patent protection is not "market failure"--it's just the normal market mechanism of monopoly capitalism, and that's what it must be called. Shane Mage "All things are an equal exchange for fire and fire for all things, as goods are for gold and gold for goods." Herakleitos of Ephesos, fr, 90 _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
