16.4 Broader Social Goals

Even if the free-market system were to generate an allocatively efficient
outcome, there are broader social goals the market system is unlikely to
achieve. For example, the desire for an “equitable” distribution of income
is unlikely to ever be achieved by a free market. While this goal is
basically an economic one, there are other important social goals that are
not economic, such as developing a society in which all people share
common values like social responsibility and a belief in basic human
rights. Whether society’s broader social goals are economic or not,
markets are often not an effective means of achieving them, precisely
because the “goods” in question are not exchanged in decentralized
market transactions.

Even in the absence of market failures, the government may choose to intervene in markets to

achieve broader social goals.

Income Distribution

As we saw in Chapter 14 , an important characteristic of a market
economy is the distribution of income that it determines. People whose
services are in heavy demand relative to supply, such as good television
news anchors, wise corporate CEOs, and outstanding hockey players,
earn large incomes, whereas people whose services are not in heavy

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