General Equilibrium, Market Failure, and Policy
Note: the first time you go through each of these topics you should click on the following items in sequence.
|Quite apart from
the socialist attack on the idea of leaving economic life to control by
markets, there are other problems of a more technical nature which afflict
market-based systems. In this topic we briefly review how a competitive
market system could theoretically bring about an optimum solution to the
problem of maximizing total welfare within the constraints of limited resources.
We then look at some problems inherent in market systems which jeopardize
their ability to deliver such an outcome.