Market Failure and Government Failure in One Go

A lovely clip from last night's Channel 4 News highlights both issues - and points you towards the welfare implications of both. This would make a lovely example for any of you facing examination questions which are asking for an evaluation of government intervention in the market.

In the first place, if the pharmaceutical companies are provided imperfect information, how might this affect market outcomes? And if there is an adverse effect, is there a case for government intervention? How would you both justify this, but equally, how might you oppose intervention?

Secondly, to what extent does spending £500m on Tamiflu represent a government failure? How would you define this? And how might it apply in this case. This is all thought-provoking stuff, I hope.