ABSTRACT
Market Failure: Can We Trust the Free Market? In 1776, Scottish economist Adam Smith wrote that self-interested individuals operating in a free market could achieve efficiency as if guided by an "invisible hand." Given these words from one of the founding fathers of economics, why would anyone want to meddle with the market? Unfortunately, as Smith himself seems to have understood, the conditions required for free-market efficiency are seldom fully met. This section introduces four issues that motivate assistance from the not-so-invisible hands of policymakers.
