Economic arguments assume the existence of perfectly competitive markets in which consumers and producers behave rationally in order to maximize utility and profits. In a perfect market, goods and services flow openly, there are no transaction costs, entry and exit is free, and producers and consumers possess complete information about the price, physical characteristics, and availability of each commodity.
But the perfect market is an abstraction. Markets do not operate unfettered by regulation. The power between producers, employees, and consumers is not distributed evenly. Governments are not always able to redistribute economic wealth to ensure that all members of society have equal access to the resources and opportunities necessary to meet their needs. The richest 1% of the world (50 million people) receives as much income as the bottom 57% (2.7 billion people). Thirteen per cent of the world’s population is undernourished, even though, on average, the world produces sufficient food to meet everyone’s required daily caloric needs.
Negative externalities, such as noise, congestion, and pollution, impact those who have had no role in, nor consented to, the economic transaction. …The “tragedy of the commons,” described by G. Hardin in Science (December, 1968), demonstrates how market equilibrium theory breaks down for common property resources. Economists tend to ignore these realities.