Introduction to Market Failure - Negative Externalities of Production

[lnqusitor]

Of course the problem is, since market equilibrium theory is wrong how does that effect the theory of when to impose and excise tax?

[welkerjason]

@lnqusitor I'm not sure what you mean by "market equilibrium theory is wrong". It's not a theory as much as an observation. Markets do achieve equilibrium prices. Whether those prices are "right" or "wrong" is a question addressed in economists study of market failure. (you should watch that playlist for perspectives on efficient and inefficient allocation of resources by different markets).

[lnqusitor]

@lnqusitor Wow I can make a whole video answering this question. When I say "wrong" I mean is a a predictor of human behavior it is not very accurate therefore is a false efficiency. As Eugene Fama said, it is efficient under conditions that do not exist in real world markets. That being said I am approaching this from the standpoint of a behavioral economist, sadly there are not videos on the fundamentals of that on the web. Maybe that is niche for me to fill.

[TheMrMuzzle]

THANK YOU SO MUCH THIS REALLY HELPED!!