środa, 20 stycznia 2010

Market Failure

Market Failure - Arnold Kling JANUARY 14, 2010 Econlib (Library of Economics and Liberty)

I want to propose a new definition of market failure. For me, market failure exists to the extent that innovation is blocked by incumbents. If innovators can succeed by out-competing incumbents, then the market is working. If incumbents have a self-reinforcing system that keeps out innovators, then we have market failure.

It is like the tenure system in academia. Who gets tenure? Above all, it is people who support the existing tenure system. 

Incidentally, that is my explanation for why the Internet has failed to alter the academic journal system. People who go through the tenure process have an enormous stake in not changing the process. The process is self-reinforcing.