Lesson Report:
## Title: Week 5 (Part 2) — Market Failures, “Efficiency as Politics,� and Linking Grievances to Policy Problems
**Synopsis (objectives & arc of the session):**
This session continued the course unit on markets and how markets shape public policy, with a heavy emphasis on reviewing core vocabulary (market, efficiency, market failure types, externalities) to ensure a shared foundation for upcoming work. The class then introduced Stone’s argument that “efficiency� is not a purely technical calculation but a political concept shaped by power and goals, and students practiced diagnosing market failures through personal examples and a new grievance-to-analysis activity that will continue on Thursday.
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## Attendance
– **Absent students mentioned by name:** 0
– **General note:** Instructor noted that “a decent numberâ€� of students were missing, but no absent students were identified by name in the transcript.
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## Topics Covered (Chronological, detailed)
### 1) Week 5 launch + course continuity (“Markets and how markets affect policy,� Part 2)
– Instructor framed this as **Week 5**, continuing the **second part** of the markets-and-policy sequence.
– Emphasis: everyone must share the same **basic vocabulary** from the past two weeks to proceed successfully.
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### 2) Rapid vocabulary refresh: Market, efficiency, and market failure (3 internal failure modes)
**Market**
– Prompted definition (“What’s a market?â€�) and confirmed:
– A market = **an exchange between parties** where each has something the other wants.
**Efficiency**
– Prompted definition (“If a transaction is efficient, what does that mean?â€�) and confirmed:
– Efficient transaction = **all parties get the most for the least** (i.e., best outcome/benefit for cost from each party’s perspective).
**Market failure**
– Reconnected “markets are where transactions happenâ€� and that markets can fail when transactions aren’t efficient.
– Re-identified the **three main internal causes** of market failure:
1. **Asymmetry of information**
– Defined as: **one party knows more than the other** in a way that affects the transaction.
2. **Voluntarism**
– Defined as: **no real choice** (at least one party cannot freely choose whether to buy/sell, or cannot choose from whom to buy).
3. **Rationality**
– Defined as: people are **not always economically rational**; they do not always pursue maximum efficiency and may buy things they don’t need (or buy for social/trendy reasons rather than utility).
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### 3) Quick bridge from last week: Externalities (but shifting focus away from them this week)
– Instructor reminded students of **externalities** covered previously.
– **Externality definition** (as explained in class):
– A positive or negative effect of a transaction that impacts **people beyond the buyer and seller**.
– Concrete example used:
– **Coal purchase/burning**: neighbors are affected by pollution/other effects even though they are not part of the buyer-seller transaction.
– Framing for this week:
– This week’s focus = **internal failures** (information asymmetry, voluntarism, rationality), not externalities.
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### 4) Stone reading integration: “Efficiency is political,� not purely numerical
**Main claim attributed to Stone**
– Efficiency is often treated like a **technical algorithm** or a chart-based calculation.
– Stone’s counter-argument: **efficiency is inherently political** because:
– Deciding *what counts as efficiency* depends on goals/values.
– The power to define goals is itself a form of **political power** (parallel to earlier course content: defining “policy problemsâ€� vs “conditionsâ€� is power).
**Extended example: The public library case**
– Scenario/problem setup:
– A public library faces familiar issues:
– Books not returned on time; collections/facilities are outdated.
– Proposed “easy fixesâ€� (buy more books, new couches, repaint, computers) are blocked by a common constraint:
– **Money / limited funds**.
– Economist’s “efficiencyâ€� diagnosis:
– Finds that library spends ~**60% of revenue on librarian salaries**.
– “Efficientâ€� market-style solution offered:
– **Fire librarians and/or pay them less**, then redirect savings to upgrades (bathrooms, computers, new books).
– Stone’s critique (politics of efficiency):
– That “efficientâ€� solution assumes a specific definition of the library’s purpose:
– e.g., a library’s goal is being “modern,â€� “shiny,â€� full of books, facility quality, etc.
– Alternative goals/purposes were elicited:
– Library as a **community resource**.
– Library as knowledge distribution to a particular **public/community** (e.g., neighborhood users, students, teachers).
– **Librarians as community members** with jobs and roles beyond “book retrievalâ€�:
– Support research, community programs, workshops, child-focused programming/safe space, etc.
– Conclusion emphasized:
– Firing librarians may improve one efficiency metric (cost reduction) but damages other politically-valued goals (community employment, services).
– Therefore, the definition of “efficientâ€� is a **political choice**, not an objective calculation.
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### 5) Activity 1: “Regretted purchase� as a market failure (individual reflection → partner diagnosis)
**Individual prompt (2–3 minutes writing)**
– Students wrote about:
– One purchase they regret
– 1–3 sentences explaining why they regret it
**Instructor transition**
– Regret is treated as evidence of **inefficiency**: a purchase that later seems “not worth itâ€� indicates a market failure from the buyer’s perspective.
**Partner task (approx. 5–7 minutes)**
– Students diagnosed the root cause using the 3-failure framework:
– **Information asymmetry test:** “If I knew more beforehand, would I still buy it / pay this price?â€�
– **Voluntarism test:** “Did I have a choice to buy or choice of seller/provider?â€�
– **Rationality test:** “Did I really need it, or was it trendy/social pressure?â€�
**Goal stated**
– Each pair should end with:
– (1) a specific regretted purchase
– (2) a reasoned classification of the market failure type
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### 6) Whole-class share-out: Examples of failures + how “efficiency� depends on perspective
**Example A: Luxury brand purchase (Chanel plastic bag)**
– Student example:
– Bought a “stylishâ€� plastic Chanel bag for about **$6,000**.
– Later learned production/material costs were far lower (student estimated ~$150 total), with most cost going to brand value.
– Student classified as: **information asymmetry** (didn’t know underlying cost/value structure).
– Instructor follow-up:
– What would increase efficiency? **More information** beforehand so the buyer could better judge value and refuse that price.
**Example B: Skincare anti-acne product**
– Student example:
– Bought an anti-acne product that did not work as intended.
– Classified as: **information asymmetry**
– Buyer lacked expertise on ingredients/effectiveness.
– Instructor elaboration:
– Efficiency could improve via **expert consultation** (e.g., doctor/dermatologist) to properly value the product (pay less or not buy).
**Example C: Gym contract / subscription trap**
– Student example (international context described):
– Signed a gym contract believed to be 12 months; difficulty terminating it; continued paying monthly fees (~25 euros) and accumulated large cost (student estimated >600 euros).
– Instructor highlighted ambiguity:
– Different actors might label the failure differently:
– Gym perspective: **rationality** (“you should read the long contractâ€�).
– Consumer perspective: **information asymmetry** (unreasonable expectation to fully process fine print/lengthy contract).
– Key teaching point:
– Classification and “efficiencyâ€� judgments can be **political/subjective** (tied to whose viewpoint is used).
**Discussion of voluntarism examples**
– Instructor attempted to identify a clear voluntarism-based regret.
– Students suggested cases like:
– Losing a charger and having to buy one (instructor later used this as the main voluntarism illustration).
– Free trial → unexpected charges if not canceled (instructor noted this can be interpreted multiple ways: rationality vs info asymmetry vs voluntarism, depending on viewpoint and context).
– Instructor clarified:
– Accidentally breaking a product after purchase is not automatically a market failure unless the product was misrepresented (which returns to **information asymmetry**).
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### 7) Mini-lecture: Voluntarism failures, monopoly/oligopoly, and “natural� vs government-created dominance
**Airport charger scenario (core voluntarism illustration)**
– Situation:
– At airport, phone dying, forgot charger, flight soon, can’t exit terminal.
– Chargers in terminal cost unusually high (28–30 euros).
– Key concept:
– Lack of voluntarism occurs because the buyer is **forced** by constraints (time/security/limited sellers) to accept a price they otherwise would reject.
**Monopoly vs oligopoly definitions**
– **Monopoly:** market dominated by **one** provider.
– **Oligopoly:** market dominated by a **few** providers.
**Why monopolies/oligopolies exist: barriers to entry**
– Instructor used “why start a small shop/restaurant but not an ISP?â€� to illustrate:
– ISPs require:
– Government permissions / bureaucracy (digging streets, installing cables)
– Very high **capital/infrastructure costs**
– Difficulty competing due to massive upfront investment (barrier to entry)
– This leads to the idea of **natural monopoly/oligopoly**:
– Market dominance can be “naturalâ€� when the required resources/permissions are so large that only a tiny number of actors can enter.
**Government-created monopolies**
– Instructor asked for examples of legally created monopolies.
– Example raised/discussed:
– A telecom/telephone infrastructure provider (described as possibly government-owned) where law/policy may grant exclusive rights.
– Connection back to voluntarism:
– If there are no meaningful alternatives, buyers lack choice, allowing sellers to charge high prices and creating inefficient outcomes for consumers.
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### 8) Turning market concepts back into public policy skills (midterm relevance)
– Instructor previewed expectations for the **midterm (around March)**:
– Students must be able to:
– Take a **grievance**
– Argue whether it is a **policy problem** or a **condition**
– If it is a policy problem: identify **what market failure** produced it and **why** (asymmetry, voluntarism, rationality, etc.)
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### 9) Activity 2: Grievances (Telegram submission) → partner selection → “make it analyzable� (location + mechanism + harm)
**Step A: Create and submit a grievance**
– Students were instructed to think of a current grievance (Bishkek or elsewhere) and submit it to the **Telegram group chat**.
**Step B: Pairing structure**
– Instructor set a stable workflow structure:
– Students keep the **same partner** for the rest of class **and Thursday**.
**Step C: Select the grievance to work on**
– Each pair chooses a grievance by a simple rule:
– Work with the grievance **directly below your own** in the chat (or choose between the two “belowâ€� grievances associated with the pair).
– Purpose: quickly assign each pair a problem without long negotiation.
**Step D: Convert a vague grievance into a specific statement**
– Instructor emphasized that raw grievances are often too broad to analyze.
– Example used: “Dark streets with no lightsâ€�
– Added required specificity:
– **Location:** “many streets in Bishkekâ€�
– **Mechanism/cause framing:** streetlights are “turned offâ€� or “not there / not workingâ€�
– **Why it’s a problem:** creates danger for **drivers and pedestrians**
– Optional expansions suggested:
– Risks to pedestrians (e.g., safety concerns, falling into holes)
– Risks to drivers (e.g., cannot see crossing pedestrians)
**Student task (final in-class work, ~3 minutes)**
– Each pair drafts a grievance statement including:
– Where it happens (location)
– What specifically is happening / why (mechanism)
– Why it matters (harm/consequence)
**Wrap-up**
– End time: around **4:50**.
– Thursday goal:
– Continue the grievance work by sorting each into:
– **Policy problem vs condition**
– Then identify:
– the **market failure type** that led to the issue
– Reminder: do the **reading** before Thursday.
**Closing Q&A (unresolved)**
– Student asked about the increasing number of beggars.
– Instructor response:
– Instructor does not know cause; proposed multiple hypotheses (economy worsening, family support weakening, institutional changes like reduced mental health housing), but no conclusion reached.
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## Actionable Items (Short bullets, organized by urgency)
### High urgency (before next class / Thursday)
– **Students:** Complete the assigned **reading** before Thursday (instructor reminder at end).
– **Students (pairs):** Bring a finalized grievance statement that includes:
– location + specific description/mechanism + why it is harmful.
– **Students (pairs):** Be ready on Thursday to classify the grievance as:
– **policy problem vs condition**, and
– identify and justify the relevant **market failure** (asymmetry, voluntarism, rationality; externalities if applicable though this week emphasized internal failures).
### Medium urgency (administrative / participation)
– **Instructor:** Follow up on attendance pattern (“missing a decent number of peopleâ€�); consider a quick check-in or reminder about expectations.
– **Instructor policy for early departures:** Students who must leave for another class/workshop need their **teacher/instructor to email** as documentation; otherwise not excused.
### Lower urgency (content to revisit or clarify later)
– Revisit “free trial/subscription trapsâ€� with a clearer classification framework (when it’s info asymmetry vs voluntarism vs rationality).
– Consider returning to the question about the **increase in beggars** as a potential grievance case study (could be used to model how to move from observation → policy problem framing → hypothesized mechanisms/market failures).
Homework Instructions:
ASSIGNMENT #1: Complete the Stone reading (Efficiency as politics)
You will read Stone’s argument that “efficiency� is not just a neutral calculation but a political choice about goals (illustrated in class with the library example), so you can apply that idea to real policy problems and market failures in Thursday’s work.
Instructions:
1. Locate the assigned Stone reading for this week (the section we referenced in class while discussing “efficiency as politics� and the library example).
2. Read actively with the following class concepts in mind:
1) **Market** (exchange) and **efficiency** (what counts as “getting the most for the least� depends on what goals you prioritize).
2) **Market failures** (asymmetry of information, voluntarism, rationality) and how these failures relate to inefficiency.
3) Stone’s core point: deciding what “efficient� means is a **political decision** (power shapes which goals matter).
3. As you read the library example (or the portion of the reading that matches what we discussed), identify:
1) What the “economist�/technical definition of efficiency is assuming the library’s purpose is.
2) What alternative purposes/goals (e.g., community employment, public service, knowledge distribution) would change what counts as “efficient.�
4. Write brief notes (for yourself) answering:
1) In your own words, why Stone says efficiency is political (not purely mathematical).
2) One sentence connecting Stone’s argument to our market failure framework (how a “solution� can look efficient for one actor but not for another, depending on goals and power).
5. Bring your notes (digital or paper) to Thursday’s class so you can use them when we sort grievances into **policy problems vs. conditions** and discuss what “efficiency� should mean in each case.
ASSIGNMENT #2: Finalize your grievance statement for Thursday’s policy analysis activity (with your partner)
You will turn a brief grievance (like “dark streets with no lights�) into a specific, analyzable statement (location + what exactly is happening + why it is a problem), so you can use it on Thursday to (1) decide whether it is a **policy problem** or a **condition** and (2) identify which **market failure(s)** contributed to it.
Instructions:
1. Confirm which grievance you and your partner are working on:
1) Use the in-class rule: **select the grievance that was posted directly below yours in the Telegram chat** (you and your partner choose between the relevant options, as discussed in class).
2. Rewrite the grievance so it includes all three required parts (modeled on the “dark streets� example we built together):
1) **Location**: Where is the grievance happening? (e.g., “many streets in Bishkek,� a specific neighborhood, a specific service/sector, etc.)
2) **Specific description of the issue**: What exactly is occurring (not just a label)?
– Example from class structure: not only “streets are dark,â€� but **why** they are dark (e.g., streetlights are off, missing, or not functioning).
3) **Why it is a problem (harm/impact)**: What concrete negative outcome does it create, and for whom?
– Example from class structure: “This creates a dangerous situation for drivers and pedestrians.â€�
3. Make your statement clear and “testable� by ensuring it is not too vague:
1) Avoid writing only a short phrase (e.g., “corruption,� “bad roads,� “dirty air�).
2) Add enough detail that someone outside our class could understand the situation and why it matters.
4. Prepare to use this statement on Thursday by adding (even as rough notes) your initial thoughts on:
1) Whether you think it is more likely a **policy problem** or a **condition** (you will defend this in Thursday’s activity).
2) Which market failure(s) might be relevant (**information asymmetry, voluntarism, rationality**), even if you are not fully sure yet.
5. Bring the finalized grievance statement (and your rough notes) to Thursday’s class; we will continue from where we stopped and work toward identifying the relevant market failure(s) that led to the problem.