Source: David Friedman’s Substack
by David Friedman
“‘Market failure,’ like many technical terms, is a misleading label. Not all ways in which markets fail count as market failure and market failure occurs in many contexts other than markets. It is most usefully thought of as a situation in which individual rationality does not lead to group rationality, in which the result of everyone taking the action he correctly believes to be in his rational interest is worse, in extreme cases worse for everyone, than if everyone did something else.” (05/27/25)