Here’s a pretty decent passage from the 2024 Economic Report of the President. It’s from the chapter on housing policy.
Housing shortages and unaffordability have risen over the last 60 years, in large part because of local land-use policies that restrict housing density and what can be built. These effects are felt most by low-income and vulnerable families, which are increasingly priced out of the housing market. Because many amenities are bundled with housing and neighborhoods, housing supply shortages inhibit economic mobility for millions of Americans. Investing in the housing supply and producing affordable units opens the door for upward mobility and increases overall economic growth. (p. 172)
But then the writers add in the very next sentence:
Persistent market failures in the housing market create a role for government.
The Economic Report of the President is written by the economists at the President’s Council of Economic Advisers. I’ve participated in writing chapters in 2 of them, the ones for 1983 and for 1984. I’ve read through the annual report (ERP) every year since and occasionally have read the whole thing.
It seems clear from context that President Biden’s economists regard “local land-use policies that restrict housing density and what can be built” as a market failure.
They’re not. They’re government failure. They involve governments doing certain things that the CEA economists, apparently, and I disapprove of. But it’s government doing these things, not private actors in the free market.
So I decided to do a check. I searched for “market failures” and found many instances in the 2024 ERP. Then I searched for “government failures.” Guess how many I found.
The answer is a four-letter word that starts with “z” and ends in “ero.”
It's too bad that "Government Choice Theory" was misnamed as "Public Choice Theory". Despite the fig leaf of public elections or representatives, it is the human representatives & human bureaucrats who make decisions. All of which have some good and bad, or desirable and undesirable results.
The "market" is the aggregate of what the public, with limited budgets, is willing to buy -- and the producers are willing to make. It is mostly govt stopping people as producers from making what buyers are willing to buy that cause econ problems called market failure--as housing shows.
Tho I'm pretty sure Detroit & Compton, tho maybe not Harlem, have pretty affordable housing -- yet few families want to move there because of ... lifestyle choices of neighbors. (Which many think are because of govt failures, tho often disagree on what the govt failure was.)
Tho the basic failure is the desire of so many people, especially most rich & educated, for a Free Lunch -- which they understand to mean "somebody else pays for it".
Markets cannot fail, since a market is simply two individuals freely transacting. Aggregations of those individuals may produce results others don't like, but things I don't like isn't "failure". And far too often, markets doing exactly what they ought to do - high house prices for example, are cited as failure. But high prices are information, telling us where we should shift resources to, information that tells us there is demand that is not being met.