The traditional market failures and other limitations of the competitive framework
discussed in Chapters 5 and 6 identify circumstances in which pi-iyate economic activity
may not lead to Pareto efficiency. Thus, they indicate the potential for Pareto
improvements through public policy. As we discuss in the next chapter, correcting
government failures also offers opportunities for making Pareto improvements. Values
other than efficiency, however, warrant consideration in our assessments of the
extent to which any particular combination of private and public activity achieves
the "good society." As individuals we turn to philosophy, religion, and our moral intuition
to help ourselves develop systems of values to guide our assessments. Absent
a consensus on the values to be considered and their relative importance when they
conflict, our political institutions must unavoidably play a role in selecting the specific
values that will have weight in collective decision making. Nevertheless, we sketch
here some of the more common rationales for public policies that are based on values
other than efficiency