Exploring the ‘Market Failure’ Hypothesis

Christopher Hood, Henry Rothstein and Robert Baldwin

in The Government of Risk

Published in print August 2001 | ISBN: 9780199243631
Published online November 2003 | e-ISBN: 9780191599507 | DOI:
 Exploring the ‘Market Failure’ Hypothesis

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Explores how far variety amongst risk regulation regimes can be explained by ‘market failure’ explanations of risk regulation. A ‘market failure’ approach assumes that state activity will consist of the minimal level of intervention needed to correct for specific failures in market or tort‐law processes created by risks—i.e. where the costs of individuals informing themselves about risks or opting out of risks through market or civil law methods are very high. This chapter analyses the market failure characteristics of the nine case‐study risks and then compares theoretical expectations with what is observed in practice. Analysis suggests that ‘market failure’ explanations can go some way in explaining observed regime variety, and certainly take us beyond superficial ideas of the ‘nanny state’ or its converse, but cannot predict a substantial proportion of observed features and paradoxes.

Keywords: civil law; costs; information; intervention; market failure; nanny state; regulation; risk; tort law

Chapter.  8336 words.  Illustrated.

Subjects: Comparative Politics

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