In today’s world, the market faces a lot of competition and each firm wants to attain the competitive advantage and maximize profits. Some businesses resolve to engage in unethical business practices for them to have a significant market share which is not the best way of competition. This paper will effectively talk about markets and give a detailed response to the article “Making Markets Work” by Lewis Mumford and dissect the arguments put forward by the author.
Making Markets Work According to Lewis Mumford, markets have become so imperfect in their growth to an extent that they deplete the natural resources. Natural capitalism aims at making markets remain purposeful as well as solve the problems faced by market as they operate within their boundaries and limits. It is a good approach to regulating the market since the government monitors the market continuously and citizens are informed hence avoiding the exploitation of markets due to information asymmetry and averts abuse and misuse of the market forces. The article suggests that the factors that bring superiority in the market include; innovations, maximizing competition and making profits from the efficient use of technology. However, for markets to function well there must be an efficient allocation of the scarce resources. In my opinion, it is not the best way of resource allocation because when a focus is on efficiency, there will be no equity leading to social injustice leading to irrational behaviors in the market. With efficiency, there are imperfect markets because of monopoly, lack of transparency, exaggerated cost and lobbying market rules for private interest from the industries that have subsidies. Also, business actors are irrational, and they deviate from the market standards and regulations. The book addresses several causes of market failures and possible solutions. To begin with, we have capital misallocation; which is whereby the resources are not allocated at the maximum level, and all the resources are combined to produce the maximum production.
I agree with the point in that; misallocation is persisting due the inefficiency of the functioning market and high-interest rates. In the energy sector, much focus is on the supply and not the demand meaning much allocation is on the supply side.I concur with this book that organizational failures have contributed to imperfections in the markets because in an organizational have a lot of bureaucracies and complexities in the environment hindering the making and implementation of decisions. To curb the problem, individuals are rewarded and an alignment between personal and business objectives are created. I also concur with this book that information failure as well, causes reluctance in investing resources efficiently. This is due to lack of accurate and up to date information. Information is required to understand the market prices and risks involved. People should be empowered with information by training and education using seminars and the media to reduce information asymmetry. Failure in regulatory framework is another negative factor in the market.
Unfavorable regulations put in place …