Market Failure or Market Success?
By David Henderson
Rising incomes also have contributed to our expanding waistlines. U.S. GDP per capita and calorie intake have risen virtually in tandem since 1970. At the same time, the growth of the service sector and the use of workplace technology have made our working lives more sedentary, so we burn fewer calories.
The net effect of these changes has been a classic case of market failure: Unbounded demand has met almost unlimited supply, and the resulting over-consumption has greatly harmed our society’s health. Contrary to conventional wisdom, we don’t believe that the remedy is necessarily better education about nutrition: Everyone reading this probably knows, for instance, that salad is a healthier option than pizza. The plain fact is that we gain weight by eating too much. What we recommend instead is an austerity program based on a handful of insights from economics.
This is from Chris Payne and Rob Barnett, “Would Adam Smith Eat That Burger,” Wall Street Journal, December 22, 2017.
When “unbounded demand” [I think they mean “big increases in demand”] meets “almost unlimited supply” [I think they mean very elastic supply], the result is a large increase in output without much of an increase in price. This is not market failure, classic or otherwise. This is market success. We can regret demanding the things we do. But it’s not the market’s fault that we are supplied with the things we demand.