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Market Failures

In: Elements of Neo-Walrasian Economics

Author

Listed:
  • Takashi Negishi

    (The Japan Academy
    The University of Tokyo)

Abstract

The so-called fundamental theorem of welfare economics is demonstrated in the preceding chapter. Apart from the problem of income distribution, the competitive market mechanism can generate an optimal social state in the sense that the resultant allocation of resources is Pareto optimal. Several conditions are, of course, assumed explicitly and implicitly to prove the theorem. If one regards these conditions approximately realistic, the best conceivable policy is that of laissez-faire, as far as the allocation of resources is concerned. Indeed, the fundamental theorem of welfare economics is the modern foundation of the historically celebrated doctrine of free trade.

Suggested Citation

  • Takashi Negishi, 2014. "Market Failures," Advances in Japanese Business and Economics, in: Elements of Neo-Walrasian Economics, edition 127, chapter 0, pages 127-146, Springer.
    • Handle: RePEc:spr:advchp:978-4-431-54535-4_8
    DOI: 10.1007/978-4-431-54535-4_8
    as

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