Asymmetrical information, obesity and market failure!

Lack of information leads to less informed decisions being made and therefore an undesirable equilibrium and market failure. In this day and age is it possible for a smoker to not know the consequences of his/her action?  What about transfats?  According  to the BBC transfats account for 20 000 heart attacks and 7000 deaths in the UK each year .  What are transfats?

“Artificial trans fats are used both in processed food and in restaurants as a way to improve the shelf life or flavour of foods. The fats are created when hydrogen is added to vegetable oil, making it a solid.”

Did you know that up until August this year Mcdonald’s hamburgers were made of meat that was deemed unfit for human consumption.  To make the meat fit for human consumption they “washed” it in ammonium hydroxide!

The Tragedy of the Commons

– Part 1 – What happens when many people seek to share the same, limited resource? – Chalk Talk – Part 2 – Are there any solutions to The Tragedy of the Commons? – Chalk Talk – For the Khan Academy enthusiasts… 🙂

 Also, you may want to check out these real-life examples of the Tragedy of Commons…

Maximising the welfare of society.

As rational economic agents we all, consciously or unconsciously, undertake a form of cost benefit analysis when deciding on a particular course of action.  As we consume a product we attempt to extract as much marginal utility from it as possible. Generally we will stop consuming when there is a negative impact on our well being.  Think about gulping down that ice cold water after a hot sports day race; the criteria for giving the green light to certain infrastructure projects is similar, the difference is that the social costs and benefits must be considered.  This leads us to the normative and positive aspect of appraising such projects.  Are such projects, as the ones below, given the go ahead based on political persuasion or rational economics, or are these one in the same?

HS2                  HS2 revision                 super sewer                 boris island        edinburgh trams          london gateway        building roads       desalination in Q8           desalination downunder

Why are we all forced to be leaders?

ImageWhether we’re applying for a position of status, or generally talking about attributes of great people – we tend to admire leadership qualities. But why is a leader such a desirable personality? Furthermore, why are we always encouraged to be leaders? Universities’ seem to cherish the idea of a student who is all rounded, but ignorant of those who have a passion and specialize in only one subject i.e the “nerds”. Yet basic economics suggests that specialization in a field is more effective and efficient.

shyness is nice    you are a leader    warwick     you are not a leader

I blame the Market! No wait… the Government!

The Free Market economic system isn’t perfect, and suffers from a variety of different failures eg. Income inequality, demerit goods, environmental issues (negative externalities) . That’s why countries have a Government – to correct these market failures. But hold on! What happens if the Government fails? Who do we point the finger at now? The Market, or the Government?

market and government failure

5 market failures