The theory of economics holds that in a fully competitive market, due to the role of market mechanisms such as price and competition, manufacturers and consumers voluntarily reach a mutually acceptable contract in the process of maximizing their own interests, commodity prices reach a balance, and the market is clear. Under the adjustment of "invisible hand", scarce resources are rationally allocated, "automatic" reaches "Pareto optimization", and the welfare of the whole society is maximized.

The prerequisite of market regulation and price mechanism is a complete and fully competitive market, but it does not exist in reality and the conditions for achieving full competition are not available, so the market itself in reality is not omnipotent. Guangzhou in mid-February, Beijing in April, the drug market and even the vegetable market all showed obvious failures.

The supply of drugs in some areas can not solve the balance of market demand, which leads to a sharp increase in the price of drugs in some markets (in fact, the supply of many drugs exceeds demand in the national market); There are many fake and shoddy products in the market to prevent and treat SARS, including unqualified masks, disinfectant, thermometers, protective clothing and even expired drugs.

In order to reduce costs, some enterprises do not take relevant SARS prevention and control measures, which poses a threat to the whole society; Similar phenomena have seriously damaged the interests of ordinary consumers and led to the reduction of the overall welfare of society.

Stie Grize demonstrated that "market failure" is based on "information asymmetry". In the SARS market, it is precisely because of the serious information asymmetry between consumers, drug retailers, drug wholesalers, manufacturers, raw material suppliers and our government that the market fails.

Consumers' lack of knowledge about SARS, coupled with the spread of rumors, have a sense of fear, relying on their own experience or limited information learned from some media, blindly follow their feelings and "snap up"; At the same time, there is a lack of understanding of the market supply, and the illusion of price increase and shortage intensifies the psychology of "snapping up", so the higher the price, the more you have to buy in large quantities.

Drug retailers and wholesalers also lack an understanding of the overall market supply of drugs, so they pay first and then pick up the goods, and also purchase when the price rises, so as to meet the needs of customers as soon as possible. In this case of serious information asymmetry, there are many illegal "individual drug dealers", which further aggravates the deterioration of the market. So in Guangzhou, there is a phenomenon that each bag of semi-orchid stems costs more than 50 yuan.

Invisible hand failure needs visible hand to correct, that is, the government adjusts the market mechanism, makes up for market defects and corrects market failure. The market failures in Guangzhou and Beijing were quickly controlled by the government through timely notification of various information, price control, government procurement, and ordering relevant units to enforce measures to prevent SARS. It can be said that the government's control measures are quite effective.

Extended data

In view of the omnipotence of the market, market failure points out that the market mechanism has inherent defects, which are mainly manifested in the following aspects: the market mechanism itself cannot eliminate monopoly, so it cannot guarantee the completeness and thoroughness of competition;

It is impossible to achieve stable and balanced economic growth. Although the market mechanism can eventually make the economy tend to be balanced, it has a long time lag and high cost (such as periodic economic crisis) and cannot meet the social demand for public goods.

It is impossible to solve the contradiction that the income distribution gap is too large, and the distribution is carried out in full accordance with the principle of market mechanism (property ownership is consistent with income right), which will lead to the excessive income gap of social members, thus causing social instability.

Baidu Encyclopedia-Market Failure and Government Failure

Baidu Encyclopedia-Market Failure