Government Failures
read the following overview below and answer the following questions.
For your main (initial) response, construct thoughtful and detailed responses to the Discussion. After your initial response, post at least two substantial responses to your classmates and instructor’s posts in order to earn full credit.
The role of a government in the market economy is one of the most debated issues in economics. Similarly, one of the most enduring debates on U.S. economic history focuses on the role of government in the economy. Some argue that government regulation of the U.S. economy is too little and too late. On the other hand, there is also a claim that the U.S. economy is no longer a free market due to too many regulations.
Read the Last Word piece, “Government Failure” in the News, in Chapter 5 in your textbook. Investigate the use of special-interest lobbyists and its connection with the government failures. The process of lobbying legislatures is itself becoming a big business. State legislatures are under the same kind of pressure from interest groups as the Senate and the House of Representatives.
Questions to Answer in one page:
• What are the roles of government in the market economy? Based on the current economic conditions, to what extent should the government intervene in the market economy?
• What are the justifications given in favor of more government involvement in the market economy? What are the reasons given in favor of less government involvement in the market economy?
• Provide an example to discuss how special interests can succeed in perpetuating policies that are opposed by the majority of voters because the costs of organizing and motivating groups to take political action increase with group’s size.
The role of government in the market economy is to provide a framework for economic activity and create guidelines that help ensure fair and equitable trading conditions. Government’s ability to regulate and intervene in certain areas also helps protect consumers from potential abuses, such as price gouging or monopolistic practices (Lai, 2011). To this end, governments often introduce policies aimed at promoting competition between businesses, while also providing assistance to those who may struggle with market forces (Sharma & Saini, 2017).
In terms of the current economic situation, it is clear that government intervention can be beneficial. For example, countries including the United States have recently implemented stimulus packages which seek to encourage spending by providing tax relief for individuals as well as ensuring access to credit for small businesses. Such measures are necessary due to how heavily companies rely on consumer demand during times of economic uncertainty (Holtmeier et al., 2018). Governments should also consider introducing additional regulatory measures which focus on preventing unfair pricing tactics being employed by companies in order to take advantage of customers during periods of financial distress (Cheung et al., 2019). Despite these efforts however, it is important that governments do not overstep their boundaries when intervening in markets- excessive regulation can prove counterproductive if it hinders business investment and restricts innovation (Rodriguez & de la Torre Sanchez del Rio, 2020).
