Market Based Efficiency

Market Efficiency is one of the most problematic concepts in all of economics. In the model of general equilibrium, markets operate efficiently if all the assumptions of so-called perfect competition are fulfilled. One of them, omniscience, or perfect knowledge regarding the past, present, and future, ensures that people never err and hence follow only the optimal, efficient paths. As this is never true in reality, it often makes people believe that market efficiency is impossible, hence real markets are considered to fail, and therefore some remedy through the operation of the public sector is needed. Examples of textbook market ...