TMGT 3337 Chapter Notes - Chapter 3: Illicit Financial Flows, World Economic Forum, Cengage Learning

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25 Apr 2022
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Title: spontaneous order, markets, and market failure (chapter 3 of managerial economics. Although markets are believed to be the most efficient allocation mechanism because they create incentives for efficiency and innovation, they are not immune to market failures. When markets fail, the economist must discover the reason for failure and intervene in order to implement a better mechanism to allocate resources. Asymmetric information, adverse selection, moral hazard, free riders, corruption, and harmful forms of government are just a few of the many externalities that can damage the economy. These have been addressed in many different forms with varied results. Solutions to market failures include the assignment of property rights, private ownership, government intervention, operational permits, deductibles, and transparency. Some economists argue that markets do not fail; that in case of an apparent failure all that is needed is the assignment of private property, or that the so called market failures will eventually resolve themselves.

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