This excerpt from the New York Times on Thursday describes the impact of exposin

Question

This excerpt from the New York Times on Thursday describes the impact of exposing children to aging lead-based paint: “A 2005 study concluded that increasing a child’s blood lead level to 10 micrograms from 2.4 translated to a 3.9-point drop in I.Q. A 2015 study of Chicago elementary school students concluded that blood lead concentrations of five to nine micrograms explained up to 15 percent of failing grades in reading and math.” With public goods, common resources, and externalities in mind, what sort of market failure is this? Explain

Explanation / Answer

Market failure, failure of a market to deliver an optimal result. In particular, the economic theory of market failure seeks to account for inefficient outcomes in markets that otherwise conform to the assumptions about markets held by neoclassical economics (i.e., markets that feature perfect competition, symmetrical information, and completeness). When failure happens, less welfare is created than could be created given the available resources. The social task then becomes to correct the failure.

This is a Common property resource market failure.

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