seek to judge when and whether governmental intervention (such as taxes, welfare, and government regulation) can result in potential gains in efficiency. According to Gregory Mankiw, a New Keynesian economist, governmental intervention can improve on market outcomes under conditions of "market failure," or situations in which the market on its own does not allocate resources efficiently. Market failure occurs when an externality is present and a market either underproduces a product with a positive externality, or overproduces a product that generates a negative externality. Air pollution, for instance, is a negative externality that cannot be incorporated into markets as the world's air is not owned and then sold for use to polluters. So, too much pollution could be emitted and people not involved in the production pay the cost of the pollution instead of the firm that initially emitted the air pollution. Critics of market failure theory, like Ronald Coase, Harold Demsetz, and James M. Buchanan argue that government programs and policies also fall short of absolute perfection. In this view, market failures are often small, and government failures are sometimes large. It is therefore the case that imperfect markets are often better than imperfect governmental alternatives. While all nations currently have some kind of market regulations, the desirable degree of regulation is disputed. The relationship between democracy and capitalism is a contentious area in theory and popular political movements. The extension of universal adult male suffrage in 19th century Britain occurred along with the development of industrial capitalism, and democracy became widespread at the same time as capitalism. Research on the democratic peace theory further indicates that capitalist democracies rarely make war with one another and have little internal violence. However critics of the democratic peace theory note that democratic capitalist states may fight infrequently or never with other democratic capitalist states because of political similarity or political stability rather than because they are democratic (or capitalist). Authoritarian regimes have been able to manage economic growth without making concessions to greater political freedom. References Capitalism Capitalist theory