Regulation is rightly understood as an essential but imperfect institution. The perfect can be the enemy of the public good. The integral theory of markets, market failure, and economic regulation obscures a paradox: regulation can never be perfect in the second place because markets can never be perfect in the first place. Although regulation can be a substitutive and corrective policy instrument, it was never really meant to achieve what markets are meant to achieve. Regulation that would perfectly replicate the marketplace is not only impossible but undesirable, because the market itself is incapable of guiding economic exchange toward public purpose. Failures of the market must be addressed by political means. With the recent financial crisis, the counterfactual became factual to catastrophic effect. Markets failed, regulation failed, and deregulation failed. If there were ever a time to revisit the concepts of market and regulatory failure, it would seem to be now. Conceptual frameworks aid thinking about markets and regulation as imperfect institutions. Broadening the perspective of market failure to include structural, transactional, and distributional dimensions informs an understanding of regulation’s immense challenge. Although the rationale for restructuring and deregulation often centers on nonmarket or regulatory failure, regulation may not fail in theory or practice as much as it is failed by us. Focusing primarily on the economic regulation of public utilities, the paper considers the concept of regulatory failure and how regulation is failed as a policy institution.