In principle, government policies to reduce market failure make economic sense. They increase the level of economic efficiency in markets and thus must be judged to be economically desirable. However, in practice, all may not work out as planned. Governments may themselves fail. There are reasons why government intervention may in fact create further inefficiencies and thus not improve the use of scarce resources in a society.
Tuesday, February 28, 2012
Monday, February 13, 2012
Government Policies to Redistribute Income and Wealth
Posted by Abd. Ghafar Arif RM
If there are concerns that the free market leads to inequity then there are policies that the government can try to use to reduce inequality in wealth and income. There are three main types of policies that are available:
Monday, February 6, 2012
Government Regulation
Posted by Abd. Ghafar Arif RM
Regulation is the use of legal intervention to force consumers and producers to behave in certain ways. It is the use of government legislation in order to produce a more desirable economic outcome than that achieved by the free market.
Economists generally do not favour the use of government regulation. It is seen as a 'blunt' instrument. It forces consumers and producers to do (or not to do) certain things rather than to provide incentives. It can be seen as working against the market rather than with the market. However, governments may judge that regulation is sometimes required if a more desirable outcome is to be achieved.
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