Wednesday, December 6, 2017

7 December 2017: Market failure, government failure, and the welfare of poor people

Shantayanan Devarajan
World Bank

In many areas of public policy, governments carve out a role for themselves in effect to overcome what are perceived as widespread market failures. Examples abound across the world of governments intervening to correct negative externalities where there is a wedge between public purpose and private interest, and the outcomes are bad, particularly for poor people with the least means to cope with poor service delivery. In India, governments often turn to command and control approaches to solving serious problems of public policy, for example air quality, essentially because of a deep distrust of more market-based approaches. Governments routinely intervene in pricing, usually on the grounds of helping the poor.

But in doing so, governments often themselves fall prey to government failure, because they do not have the capacity to implement, or they get captured, or they create vested interests (“the only thing worse than a private monopoly is a public monopoly”) and corruption, or a subsidy in one part of the economy does widespread and worse damage in another part of the economy. Delhi’s air quality is a constant reminder of what happens when government failure meets market failure. And yet, governments are essential to any well-functioning economy that both provides opportunity and protects the vulnerable. What to do in the face of both market and government failures to make services work for poor people?

Date: December 7, 2017
Time: 11:00 P.M.

NCAER Conference Room
National Council of Applied Economic Research
Parisila Bhawan, 11, Indraprastha Estate
New Delhi-110002(INDIA)


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