The Market — Market Failure, and the Evaluation of Technology — Promoting Programs

Abstract

An evalution of government policy must be based on the objectives as well as on the criteria of the intervention policy to be analyzed. The evalution must also test how well suited the plan and implementation of policy measures are to achieve these goals. Although most evaluations are limitied to this level, it should only be the first stage. A comprehensive understanding of the evaluation of government action requires that the objectives of the policy be questioned and that the extent to which the aims pursued agree with basic political economic decisions be investigated. This is where the “market” as a basic coordinating mechanism comes into the picture. The underlying principle constituting a market economy, leaving the allocation of resources up to the decisions of individual actors, is based on the conviction that, as a rule, coordination by the market is best suited for achieving the highest possible degree of welfare. For this reason government intervention in the market process or corrections of decisions made by economic actors must be justified. It must be proven that there is a market failure in the area in question, i.e. that undesirable effects for society as a whole will result. In addition, we have to test the consequences of the specific type of intervention for the level of general welfare.