Market failure creates an important and genuine opportunity for government to improve market performance in ways that will add to social surplus. As history demonstrates more often than we wish, even the best-designed government policies fail to be effectively and successfully implemented. The reasons for government failure – government intervention that reduces social surplus – are not difficult to understand . The politics of special interest groups frequently generates government rules and regulations designed to promote the welfare of one group at the expense of the rest of society. And even the best intentions cannot guarantee successful implementation of policies since bureaucrats face challenges of their own, Government bureaucrats’ best efforts can be partially thwarted or entirely compromised by incomplete or obsolete information about the industries they regulate. For example, the Environmental Protection Agency (EPA) cannot effectively regulate pollution emissions unless it knows and understands both the technology of producing goods and the technology of pollution control for dozens of pollutants and thousands of industries. Grappling with such an enormous amount of information and knowledge, which is constantly changing, makes it impossible for regulatory agents to always set pollution standards at the optimal level and perfectly enforce these standards. Of course, we should remind you that perfection is not usually optimal. Expecting zero episodes of government failure is not only unrealistic, but it is also