Markets and Their Limits
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Taylor's third principle is a defence of free markets as the most reliable mechanism for allocating resources efficiently: they aggregate dispersed information through prices in a way no central planner can replicate, and they create incentives for innovation that directed economies cannot match. But Taylor is careful about what markets can and cannot do. They are efficient at producing what people with money want. They are less reliable at producing public goods (like infrastructure and basic research), at correcting externalities (like pollution), or at providing a minimum floor of wellbeing for those without market power. For builders in Nigeria: understanding both the power and the limits of market mechanisms is essential. Most valuable businesses are built with the grain of markets. Most important social problems require attention to what markets leave out.