Market Efficiency and Government Intervention Revisited: What Dorecent Evidence Tell Us?

Abstract

This essay discusses market efficiency in term of what is required for the market to be efficient and the situations in which the market may fail. It discusses externalities and public goods, imperfect competition and asymmetric information. It looks at efficiency and equity which the market typically ignore but are very important to the society; since efficient demand is backed by ability to pay, unfair income distribution affects demand and therefore the need for government intervention. It also points out the fact that the government provides the foundation on which the market rest.