Market Failure Concept, Institutionalization, and Networking - Research Paper Example

?Analysis, critique, synthesis, and conclusion Major themes found in the readings The concept of market failure is one of the major themes that the readings identify. Zerbe and McCurdy identify the theme and notes that the government falsify the concept of market failure to spearhead its initiatives but a closer analysis shows that such initiatives are not based on market failure, a concept that is not real (Zerbe and McCurdy, 1999). Another theme in the readings is unreasonable government intervention in market systems. The author supports the theme through identification of research findings that while failures are used as basis for government regulations, such assumed failures may not be real (Ballonoff, 1999). Another theme in the readings, developed through March and Olsen is institutionalism, which the authors define as a study of political entities and their relationships, through theoretical concepts and formulated hypotheses (2005). Institutionalization establishes constraints within which actors in an economic system (Ingram and Silverman, 2002). Closely related to these themes is the theme of susceptible governance whose remedy is an extensive network through “collaboration” and “performance management systems” (Imperial, 2004, p. 4). The theme is evident among practitioners as they seek to achieve better governance in an environment that experience forces from both public and private sectors. Significance of relationships between members of the networks through mutual benefit is another theme that the readings establish through Stephenson’s article (n.d.) and Milward support through his proposed guide to manager’s selection and application of collaborative networks (2006). Virtual networks through technology promote the networking (Alstyne 1997). The theme of economic governance is also significant in the readings and is developed through Mintzberg’s article (1996). Major themes from the study notes Major themes from the study notes are market failure versus government failure and institutionalization of organizational features. Analysis and critique of the themes One of the major themes in the readings and study notes is the concept of market failure that has failed to achieve its objective of ensuring efficient allocation of resources. The concept of market failure is a tool to government’s intervention in the economy but its validity and application is questioned. While the market failure concept initially guided government’s point of intervention to regulate the economy, its role diversified to determination of intervention strategies while little attention has been paid to the concept’s validity and empirical and theoretical background into the concept do not exist. Existence of discrepancies, contrary to expectations under mixed market in which forced interact to ensure efficient resource allocation, shows that the market failure concept has failed. Government’s efforts to use the concepts towards resource allocation and optimization of social benefits have also failed and this discredits validity of the concept as applied by the government. Regulations towards environmental conservation such as taxes to curtail excessive pollution have for instance failed to identify inadequacy of the market failure concept (Vogel, 2009). Existence of externalities also challenges applicability of the market failure concept because it induces the need for a wider perspective to determining market failure (Tragakes, 2011). These challenges to the market failure concept therefore supports the proposal that the concept is ineffective and are consistent with Zerbe and McCurdy’s perspective that the government misuses the concept to justify its intervention in the economy. The theme of unreasonable use of the market failure concept is also evident in the readings and while it offers a basis for criticizing governance, it does not disqualify the need for government intervention in the economy. This position is informed because the society expects government intervention to ensure fair distribution of economic power and protection of resources. The need for fair competition effects on third parties may attract the government’s interest in circumstances that do not directly identify with market failure but could bare a relationship or relationship to market failure my exist, but vaguely (Welch, Gruhi, Rigdon and Thomas, 2011). The government may also use anticipatory market failure characteristics to intervene and prevent market inefficiencies, a case in which the market failure concept may not be identifiable (Greylin, 2007). Existence of intervention after a market failure has been corrected also form grounds for criticizing the use of market failure concept to justify government’s regulation over the economy (Gerber and Patashnik, 2007). The need for control, whether though the market failure concept or through other perspectives, is consistent with the institutionalization concept that warrants such control and vices in the corporate sector (Ingram and Silverman). The readings’ review of the theme of networking is also applicable to the globalized corporate sector in which players are extremely dependent. Synthesis of developed knowledge The readings and class notes have informed me of market failure, institutionalization, government’s use of market failure concept to regulate the economy, and networking. The concepts benefit the economy through balanced power and increased efficiencies in resource allocation and utility among consumers. Market failure concept is a necessary tool to determining regulatory needs by the government but its application is sometimes misunderstood or misused. Institutionalization is however necessary for regulatory measures to ensure correction of market failure and instill discipline. The readings have also enlightened me on the role of networking building potentials among players in the economy. Conclusion The class readings and notes have covered many themes with failure of the market failure concept, institutionalization, and networking as the major themes from the reading and market failure and institutionalization as major themes from the class readings. The themes are significant to understanding the economy because they develop insight into market operation. The resources have helped be to understand associated concepts to the themes. References Alstyne, M. (1997). The state of network organization: A survey in three frameworks. Cambridge, MA: MIT Sloan School. Ballonoff, P. (1999). On the failure of the market failure. Regulation (22.2): 17-19. Gerber, A. and Patashnik, E. (2007). Promoting the general welfare: New Perspective on government performance. Washington, DC: Brookings Institution Press. Greylin, C. (2007). X-kit FET grade 12 economics. Cape Town: Pearson South Africa. Imperial, M. (2004). Collaboration and performance management in network settings: Lessons from three Watershed Governance Efforts. IBM Center for Business of Governance. Ingram, P. and Silverman, S. (2002). The new institutionalism in strategy management. Advances in Strategic Management. (19): 1-32. March, J. and Olsen, J. Elaborating the new institutionalism. Oxford Handbooks Online. Milward, H. (2006). A manager’s guide to choosing and using collaborative networks. IBM Center for Business of Governance. Mintzberg, H. (1999). Managing government: Governing management. Harvard Business Review (74.3): 75-83. Stephenson, K. (n.d.). Reciprocity is key to the power of networks, the alchemy of mutual give and take over time turning to golden trust. London, UK: Demos. Tragakes, E. (2011). Economics for the IB Diploma with CD-ROM. Cambridge, UK: Cambridge University Press. Vogel, J. (2009). The economics of the Yasuni initiative: Climate change as if thermodynamics mattered. New York, NY: Anthem Press. Welch, S., Gruhi, J., Rigdon, S. and Thomas, S. (2011). Understanding American government. Boston, MA: Cengage Learning. Zerbe, R. and McCurdy, H. (1999). The end of market failure. Journal of Policy Analysis & Management (18.4): 558-578. Read More