Monday, May 18, 2009

Markets are not Perfect!

As mentioned in an earlier post, markets are amazing. Yet, they are far from perfect. When markets are unregulated, they create many undesirable social outcomes, such as too much pollution, poverty, and market power, and too few public goods, such as national defense, police protection, education, and investment in technology. Evidence of this is the 1969 burning of the Cuyahoga River in Cleveland, Ohio, which prompted the adoption of significant pollution control laws in the United States, such as the Clean Air Act and Water Quality Improvement Act of 1970. Prior to this intervention in the marketplace, businesses dumped so much pollution into the environment that a river literally caught on fire. To highlight this event, the Great Lakes Brewing Company named a featured ale "Burning River."

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