News Article on Market Failure

Britain to ban gender pay gaps


LONDON - BRITISH companies will be forced to reveal pay gaps between men and women under new legislation published on Monday.
The Equality Bill, which has been attacked by employer groups as unnecessary bureaucracy during a downturn, also bans age and social discrimination. The government hopes to have the Bill enshrined in law by early next year.
Equalities Minister Harriet Harman said the law contains a power compelling firms with 250 people or more to conduct a pay audit each year and publish the results.
The government hopes businesses will volunteer to perform the audit, but wants progress made by 2013 or it will make them mandatory.
Ms Harman said the law would help remove secrecy around the issue of pay discrimination, where research has shown that women are paid more than 20 per cent less than male colleagues.
The legislation will ban secrecy clauses that stop work colleagues comparing salaries, and trade unions would be able to use the information in pay bargaining, Harman said.
'You have either got to believe that women are 20 per cent less intelligent, less hard working, less committed to their job, less experienced, less qualified, or you have got to believe that there is structural pay discrimination,' Ms Harman told a news conference.
'I think there will be a major role for trade unions in terms of collective bargaining when pay information is made public.' Ms Harman rejected suggestions that the measures would harm businesses during a recession.
'Equality and opportunity underpins a meritocracy. This does not hold business back, this actually helps business,' Ms Harman said.
'When times are difficult, fairness is at a premium and it does not cost anything to be fair. It is part of helping the economy prosper for the future by tackling what is market failure because it is market failure to treat people unfairly for any reason and it is a legacy of backward-looking prejudices.' -- THOMSON REUTERS


http://www.straitstimes.com/Breaking%2BNews/Money/Story/STIStory_369267.html


Razeef

Reasons for government intervention in the market:

1. Provide information and assure information
flows.
2. Combat externalities.
3. Provide public goods.
4. Control non-competitive behavior.
5. Change income destribution.

The first four reasons may be justified because they promote Pareto optimality (efficiency). The fifth reason may be justified also if society desires to guide the economy to a particular Pareto optimal resource allocation, for example, one that is more equitable.

By cheryl

MEASURES GOVERNMENT TAKE

Here's a short summary on what types of government intervention is done in different situations.

EXTERNAL COST IN PRODUCTION

1. Market based solutions - taxes and tradable permits

2. Legislation

EXTERNAL BENEFIT IN PRODUCTION

1. Market based solutions - subsidies

2. Legislation

EXTERNAL BENEFIT IN CONSUMPTION

1. Market based solutions - subsidies

2. Legislation

3. Direct provision 

By Puja

Interesting fact :)) Kaldor-Hicks efficiency.

Economic efficiency is the using of resources in such a way as to maximize the production of goods and services. The system can be known to be economically efficient if:

• No one can be made better off without making someone else worse off.
• More output cannot be obtained without increasing the amount of inputs.
• Production proceeds at the lowest possible per-unit cost.

Kaldor-Hicks effieciency

• A type of efficiency that results if the monetary value of society's resources are maximized.
• Has a less stringent criteria and is hence applicable to more circumstances.
• Under Kaldor-Hicks efficiency, an outcome is considered more efficient if a Pareto optimal outcome can be reached by arranging some compensation from those that are made better off to those that are made worse off.
• This is achieved if the marginal willingness to pay by those who benefit from an action is equal to the marginal willingness to accept of those harmed
• One of two noted efficiency criteria used in economics. The other is Pareto efficiency.

By cheryl

Causes of Market Failure

What exactly is Market Failure?

Market Failure occurs when the price mechanism fails to allocate resources efficiently and equitably. Usually the government has to take actions and provide a non market mechanism to allocate scarce resources.

INEFFICIENCY ARISES WHEN:

- existence of externalities

- missing markets

-market imperfections(information failure - merit + demerit goods and market power)

INEQUITY ARISES WHEN:

distribution of income and wealth in the market economy is unequal and unfair

By Puja