Market Failures and the Stakeholders Left Behind

Abstract

Information asymmetry, monopsony power, and the failure by a social group to provide public goods are market failures that harm stakeholders in a systematic way in capitalistic systems of the present day. Four interrelated market failures discussed in this paper include algorithmic wage discrimination in the labor markets of the gig economy, the exploitation of information asymmetry in financial and gambling markets, the collapse of journalism as an under-funded public good and the amplification of misinformation in the attention economy of social media. By examining algorithmic management practices, platform practices that have become predatory, and how this approach to the newspaper industry by disrupting the advertising-abundant model puts the newspaper industry at risk, this study is able to show how these failures generate reinforcing feedback loops to consolidate corporate power and at the expense of vulnerable stakeholders. The paper shows that algorithmic opacities can be used to exploit all industries, diluted journalism undermines accountability, and corporate cross-platform dominance speeds up system inequalities. The evidence suggests that without the transparency, fairness, and stakeholder-oriented practices being adopted by businesses and regulated by the government, the market mechanisms cannot stop the systematic extraction of value out of workers, consumers, and communities, which will require a radical shift in the corporate governance and the governmental policies.