<P> The term' uneconomic growth' describes a pervasive ecological market failure: The ecological costs of further economic growth in a so - called' full - world economy' like the present world economy may exceed the immediate social benefits derived from this growth . </P> <P> Chang states that "it is (implicitly) assumed the state knows everything and can do everything ." Thus, this implies several assumptions about government in relation to market failures . There are three main statements . First of all, government representatives are able to evaluate the scope of market failures and to what extent it differs from efficient outcome . Secondly, having acquired the aforementioned knowledge they have capacity to re-establish market efficiency . Lastly, there has arisen an idea according to which decisions of policy - makers are not influenced by self - interest, but they are driven by altruism . </P> <P> They came up with the theory of the so - called the "second best ." They refuse Chang's theory and state that is it not possible to restore Pareto optimality even if policy makers possess the sufficient knowledge, intervene efficiently and altruism serves as stimulus for their decisions . On the other hand, the "second best" theory holds that when market failure occurs in one branch of the economy, it should be feasible to increase social welfare in another branch of the economy by violating Pareto efficiency instead of restoring Pareto efficiency by government intervention . </P> <P> Zerbe and McCurdy connected criticism of market failure paradigm to transaction costs . Market failure paradigm is defined as follows: </P>

All solutions to market failures in markets for public goods or common resources