Essay about Market Failures Government Intervention

Dan Mattera September 27, 2010 BUS 345 Essay #1 What is the basis for the contention that governments should intervene to correct market failures? (Be sure to explain what market failures are and why they are significant without providing superficial, rote definitions.) Contrast this with the argument that laissez faire is preferable to intervention. (If possible, link this to the idea of government failure, the iron law of public policy, rent seeking, and unintended consequences.) Imagine a grading rubric in which failure is considered everything except perfection. In the academic world this seems absurd but in economics whenever markets deviate from any of the ideal conditions necessary for perfect competition the result†¦show more content†¦60) at an exponential rate. Those who favor government intervention see it as reclamation of control that the government once held over corporations that kept the interest of citizens and society ahead of the shareholder’s (Korten, 61-65). Despite this incredible accumulation of power some still believe that government intervening on market transactions is a removal of freedom and can too easily lead to the sort of coercion seen in many communist states. Those who occupy this end of the spectrum argue that laissez faire maintains an efficient, innovative and mutually acceptable market system. They also contend that in general government intervention fails at implementing proper public policy to such an extent that they themselves produce a net social cost. For the most part, these government failures are not random. Perhaps the greatest cause for these miscarriages is human rent seeking which is when individuals exercise state power for the benefit of personal gain or that of special interest groups. This coincides with another cause for government failure referred to as the Iron Law of Public Policy. What this means is that by simply acting to benefit one party the government will inevitably deal out direct or i ndirect damage to another.Show MoreRelatedGovernment Intervention Lies Conviction Of The Existance Of Market Failure1177 Words   |  5 Pagesof the theory justifying the need for government intervention lies conviction of the existance of market failure, defects that make certain market situation, which by its nature is to aim to maximise satisfaction / utility and optimally allocate resources, it stops - in the sense of optimum Pareto- function properly (Francis M. Bator, 1958) . In other words, the market reduces the utility and waste resources. It must therefore step a mediator- usually government or legislative body- which will correctRead MoreGovernment and Market Failure Essay1687 Words   |  7 Pages In micro-economics market failure is characterized by resource misallocation and subsequent Pareto inefficiency. 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