Explain how well-functioning markets can benefit the society and instances where markets fail can harm the society.

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December 7, 2020
The Relationship between the Market and Society
Understanding the relationship between the market and society is essential for any economist and policymaker. It allows him to understand better how the different policies could influence the economy's rise and fall and vice versa. In this article, the author would like to focus on how markets could cause the rise and fall of society and how policymakers could influence these price movements. The subsequent sections' analysis would include the benefits and consequences of market success and failure, respectively. All in all, the author believes that there is an intricate and close relationship between these two entities that a change in one would undoubtedly influence the rise or fall of the other.
Well-functioning markets and Benefits
On the one hand, the author believes that a well-functioning market is highly beneficial for the society for it (1) reduces the need for human resources, (2) increases innovation rates, and (3) improves the individual chances for social mobility.
The first benefit of a well-functioning market relates to the decrease in manpower needed to produce commodities. Before the advent of the industrial revolution, production capabilities are mostly powered by human labor, especially in labour-intensive markets such as agriculture and textile. Although there are essential tools and mechanisms used to make the job relatively easier, human input is highly needed, making the workers' live difficult and tiring. However, since a well-functioning market pays the innovativeness of an individual or a company in terms of 'innovation rents,' new technologies that reduced markets' labor-intensiveness made human work much more comfortable.
The second benefit of a well-functioning market to society is related to 'innovation rents.' This concept is generally defined as the reward provided for entities that create innovations at a price higher than the capital's opportunity cost. Thus, when people realize that the profits that they could get from their new inventions could outweigh the opportunity costs that they have lost in developing a new tool or invention, a surge of innovation followed, which in turn improved society through the application of these technologies similar to what happened to the Industrial Revolution back 1700s.
Finally, the most essential benefit of a well-functioning market to society is improving social mobility for everyone. Although social mobility would still depend on the country's type of political system, a well-functioning market that pays innovation rents provides an avenue for even the most impoverished individuals to gain wealth by collecting innovation rents for his innovative step. One example of this could be seen from the example of the Indian State of West Bengal during the 1970s.
Before 1978, the Indian State had to rely on sharecropping...