Scientific Definition
Markets fail to allocate resources efficiently on their own.
Plain-English Definition
Markets fail to allocate resources efficiently on their own.
Feynman Explanation
The invisible hand sometimes drops the ball.
Core Principle
Markets fail to allocate resources efficiently on their own.
Mechanisms
Pending editorial review.
Markets fail to allocate resources efficiently on their own.
Pending editorial review.
Pending editorial review.
Pending editorial review.
Pending editorial review.
Regulation and internal governance can fix market failures.
Inputs (Triggers)
Pending editorial review.
Outputs (Behaviors)
Pending editorial review.
Behavioral Signature
The invisible hand sometimes drops the ball.
Examples
- Pollution and public goods are underprovided by markets.
- Regulation and internal governance can fix market failures.
Pending editorial review.
Famous Experiments
Pending editorial review.
Design Principles
- Identify externalities and design mechanisms to internalize them.
Measurement Approaches
Pending editorial review.
Evidence
Pending editorial review.
Pending editorial review.
The Perverse Incentive Lens™
How this behavior is exploited — and how to redesign around it.
- Identify externalities and design mechanisms to internalize them.
Pending editorial review.
Pending editorial review.
Interactive Mini Network
Click any neighbor to re-center the graph and follow the threads of connection.
Knowledge Graph Neighbors
Auto-linked to the rest of the Human Behavior Taxonomy by family, domain, dimension, and shared keywords.
When quality is hard to verify, bad products drive out good ones.
Exploiting price differences between markets for risk-free profit.
The study of how real humans actually decide — bounded, social, emotional, and inconsistent.
With clear property rights and low transaction costs, parties negotiate to efficient outcomes.
Specialize in what you give up the least to do.
Complements raise each other's value; substitutes lower it.
Fixed costs don't scale with output; variable costs do.
Innovation destroys old industries and creates new ones.
Each additional unit produces less marginal benefit.
A long-run planner self in conflict with a short-run impulsive self.
Owning something raises its valuation — sellers want more to give it up than buyers will pay to acquire.
Bad money drives out good when both are legally equivalent.