Market Failure and Public Policy

Many issues at the agricultural/rural urban interface can be seen as a market failure, and therefore a justification can be made for government intervention to adjust the market to yield outcomes in line with society's preferences. The failure of markets often is in the form of third-party effects of business and consumer decisions. Consumers continue to demand low-density residential housing in suburbanizing areas without anticipating the direct and indirect costs of sprawl.[3] Similarly, industrialization of animal agriculture has produced spillover effects in terms of water quality impacts on neighbors and communities and residents that are not factored into prices and the decisions of private entities about expanding these operations.[5] When citizens are concerned about the unsatisfactory performance outcomes, the existence of market failure is a rationale for development of new public policies.

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