Where markets have failed, people could in principle be made better off if government engaged with suitable measures.
Government might either step in and produce or deliver the relevant good or service, or—in a less interventionist manner—it may incentivize other actors to do so. Which of the measures governments should opt for within that range depends on the market failure as well as the institutional capacity of the government (Jack 1999).
Related to each of the three critical assumptions, there are at least three potential sources of market failures for the risk factors that give rise to chronic noncommunicable diseases (NCDs):
Insufficient and asymmetric information, externalities, and nonrational behavior. Such market failures are known as “standard” efficiency-based market failures because they have commonly been discussed in the traditional welfare economics literature in all sorts of public policy contexts. Non-standard economic rationales are also discussed in more detail.
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