 Market imperfections and government failuresWon-Yong Oh Chapter 1 in Market Capitalism and Social Responsibility, 2026, pp 2-20 from Edward Elgar Publishing Abstract: This chapter provides a foundational analysis of the limitations inherent in both market mechanisms and government intervention. It begins by examining market failures, detailing how externalities, imperfect information (such as asymmetric information), the nature of public goods, and monopolistic power prevent markets from achieving efficient resource allocation, thus generating social costs. While government intervention is necessary to address these structural market deficits, it often introduces new problems. The discussion moves to government failures, which arise from political interests, bureaucratic inefficiencies, and the risk of regulatory capture. Navigating this complex space between the two forms of failure, the chapter concludes by exploring the evolving responsibilities and roles of business. It suggests that corporations must assume proactive functions—including ethical self-regulation, strategic environmental innovation, and greater public disclosure—to internalize social costs and effectively promote overall social welfare beyond traditional profit motives. Keywords: Market Failure; Government Failure; Externalities; Regulatory Capture; Corporate Role; Social Welfare (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:elg:eechap:25938_1 Ordering information: This item can be ordered from Access Statistics for this chapter More chapters in Chapters from Edward Elgar Publishing |
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