Boy, no one on this board seems to know what a "market failure" is (other than
@volinbham and me). It's got a technical meaning in economics.
@volinbham suggested I didn't know what the term meant, so I supplied an example of someone examining how the current supply chain issues represent a market failure, in the technical, economic sense.
What Is Market Failure?
I was an economics major and have a masters degree in government/public administration so I believe I understand it. We’ll call it a market failure, fine. But you refuse to acknowledge that the root cause of the market failure was misguided, heavy handed government intervention into the market when it wasn’t necessary. The very definition you posted explicitly says the failure occurs in a free market. The failures we’re seeing aren’t typical externalities resulting from a free market. The government stepping in with exuberant unemployment benefits & pumping “free money” into the citizenry’s hands, artificially raised the wages necessary to hire workers and/or kept workers out of the workforce. Both have led to cost-push inflation where we have a decrease in supply of goods coming to market due to the cost of production or distribution of said goods, therefore raising the price of the few good that we have access to. Compounding that, is the free money floating around being thrown at too few goods.
The literal forcing of businesses to close under the threat of financial and/or penal actions (much of 2020) only exacerbated the production side and created a backlog. Tied back to the first point, once those workers went home a lot didn’t come back.
The energy sector is driven not only by pure supply and demand but it’s highly driven by speculation on the future’s market as well. The administration’s insistence on cleaner energy and pressuring of divestiture in the fossil fuel industry has helped fuel higher prices, coupled with a return to a more normal demand. The government has halted the issuing of new leases/permits for exploration and future production on federal lands while proposing to hike the royalties for drilling on current leases; both raise the prospective/future cost of oil. The administration has pressured banks to divest from the fossil fuel energy in the form of limiting access to capital for producers/investors in the name of climate change, stifling further investment and exploration. Domestic production lags behind 2019/early 2020 levels by 2M BPD and even lags behind 2020 levels as a whole. Drillers have been cautious to fire-up operations to pre 2020 levels under the “fear” of potential waning demand in the name of the boogeyman driving it all…Covid.
Here’s where government intervention into a free market has had the biggest hand in creating the market failures. Bureaucratic agencies devising and enforcing quarantine and medical decision making policies on private businesses, in addition to the government pushing a fear-mongering narrative, have had the largest & most direct impact on the functioning of the market. The logjam of sitting containers and floating ships on the west coast was created by understaffed ports at Long Beach and LA and limited chassis/drivers from Covid quarantine policies. No other sickness in modern history has one been told how long they must stay out of work before returning. A sickness that may put someone down for 2-3 days and then they’re well enough to return to work has forced them out for 10-14 days at a time. The increased work load and stress points on the workers still present, led some to say f*** it I’m out, further snowballing the situation. Thanks to the government’s intervention into the marketplace these workers can go somewhere else and make more money, due to higher wages being offered to attract workers or they can sit at home, be compensated well enough to survive while being extra-picky about future employment prospects. I have first hand experience with the latter situation. My current administrative assistant quit her job in mid-2020 because her drive was getting to her financially and she was able to collect unemployment and be better off. Her unemployment allowed her to turn down job offers and she went as far in the negotiation process of telling employers that what they offered wasn’t competitive enough because she could make more not working. Only when my opening came along, did she decide it was time to go back to work because of what it paid. What it took to get her, was nearly 20% more than we were currently paying any other admin in our department. What did we do after that? Raised everyone else’s salary in those roles to keep them on par with each other and prevent a mutiny, knowing that any of them could see the salary being offered on the public job posting. Nobody was unhappy with their wages at the time of her hiring, while the free market had dictated what they were worth and two independent entities came together on a mutual agreement, independent of any artificial, external factors.
