The Doctrine of Market Failure and Early Development Theory

Jeannette C. Mitchell

History of Economics Review, 2006, vol. 44, issue 1, 50-58

Abstract: The economics profession is undoubtedly enjoying a revival of free-market approaches to questions of development. The unfettered market is expected to produce efficiency and growth, and government action is deemed as either unnecessary or as an impediment. A market-friendly approach has not always been the case. Fewer than 50 years ago development economics embraced a more active role for the state. It doubted the efficacy of markets and argued instead that the state was the only economic agent capable of bringing about the fundamental changes required. The interventionist approach of early development economics can be understood as a result, in part, of the rise to prominence of theories of market failure around the watershed events of the 1930s and 1940s. Several theories of market failure, as adopted by development, are explored. Today the national plan appears to have joined the national anthem and the national flag as symbols of sovereignty and modernity(Waterston 1965, p. 28).

Date: 2006
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DOI: 10.1080/18386318.2006.11681229

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