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Location: Unit 2.4: Market Failure and the Role of Government
Discussion: Role of government
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tsaojames1991 |
20. RE: Role of government
Jan 20 2008, 4:40 AM EST
Saying that negative externalities can be resolved without government intervention is simply impossible. Without the government acting as a representative and re-enforcement, big issues such as global warming will take forever to reach a consensus because theoretically ALL the people who has a stake in the Earth's atmosphere will have to take part in those meetings worldwide... The cost of this... unbearable. Even if it is possible, the bureaucracy and effort that it takes for everyone to organize and get together will take too long. The main incentive of a free market, after all, is profit.
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alicesu |
21. RE: Role of government
Jan 20 2008, 5:24 AM EST
An important point to take into consideration is that sometimes the government's increased role in the economy is NECESSARY to help establish a free-market economy. While this may sound contradictory, let's consider the tragedy of the commons problem that we've discussed extensively in class. One market-based solution that most of us seem to agree on as viable is creating a market for buying and selling pollution rights. However, is it not true that this market would only be valid if the use of the pollution rights was monitored and enforced by the government? While the solution itself to decreasing use of fossil fuels is based on the idea of a free market where firms have to make profit-maximizing decisions which eventually lead to reducing their carbon emissions, etc., this system wouldn't work unless governments stepped in to create laws and regulations restricting firms from polluting unless they had purchased the corresponding rights. Without the government's participation, why would any firm purchase a pollution right when they could just freely pollute anyways without fear of the law's intervention? Without government monitoring, who would know if a firm had only purchased 100 tons of carbon emissions but was secretly letting out 200 or 300 tons? If we look at this situation from a practical point of view, it becomes clear that sometimes INCREASED government intervention can actually be necessary in order to establish and enforce a system that functions based on free-market decisions. Pretty paradoxical, huh?
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ConradLiu |
22. RE: Role of government
Jan 20 2008, 7:06 AM EST
Having a government control at least a part of the economy, however small that may be, is essential to having a successful one. After all, a "free" market is, well...free, in that private firms will do whatever benefits them the most. In a monopoly, that would be obtaining as much profit as they can, regardless of whether or not it reaches a socially optimal price. In an oligopoly, that could possibly mean collusion with other firms, raising the price to a point where it restricts much of society from consuming a good. An in every single firm, it would mean pollution to whatever point they would like--such is the tragedy of the commons. No firm will want to take responsibility for correcting any negative externalities that might result; chances are, they're producing negative externalities too. That would mean most, if not all societies, are not keeping their pollution excretions in check. It is THIS reason that a government's role in economy is crucial in maintaining a healthy level of consuming and supplying.
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jeffye |
23. RE: Role of government
Jan 20 2008, 7:52 AM EST
If governments did not intervene in the markets, then larger corporations and monopolies would definitely take advantage. This would not be of the best interest to anyone but the said company. Therefore, it is necessary for governments to play a part in the partial control of the market system, and to intervene when it is necessary, or during a problem that cannot be corrected without aid.
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TimChu |
24. RE: Role of government
Jan 20 2008, 7:52 AM EST
I think that as the market grows, we should allow a bit more government control Not a LOT more mind you, just enough to keep our ever growing economy in control. As the free market continues to expand, it will lead to quite a mess without some governmental being to watch over the process. As for correcting negative externalities, governments are still quite important. Allowing the free market to correct negative externalities may take too long and cause too much damage. A government tax or subsidy would be much more efficient and would take care of the market failure much quicker.
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andyxu |
25. RE: Role of government
Jan 20 2008, 8:54 AM EST
The answer to this question will vary for different countries with their respective economic conditions, and the current government running those countries.However, there are a few generalizations we can follow. The first is that developing countries with greater potential to industrialize and modernize will benefit from a government which places low taxes of every kind, thus encouraging consumption, venture capitalism, employment, the economy of the country. For more develop countries such as those in Western Europe, higher taxes can ensure a reasonable distribution of income and high living standards. 0 out of 1 found this valuable. Do you? |
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judy_chen |
26. RE: Role of government
Jan 20 2008, 9:41 AM EST
The government definitely should play a role in the future as well, or the world and the trade would be out of order. However, it should not play a really large role in the economy since people should solve their economic problems in market economy. On the other hand, the education, health care should have the help of government, or the poors and people who have no ability be educated would lost the chance to survive in the world.
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claire425 |
27. RE: Role of government
Jan 20 2008, 10:12 AM EST
My question for you guys is this: Just how much of a role should the government play in a modern market economy? Many politicians and economists argue that the government should play a smaller and smaller role as our market economy becomes more developed. Eventually, all goods and services can and should ultimately be provided by the free market. Education, health care, transportation, even parks and open spaces... if individuals get utility from consuming these things, they should have to pay for them in the market. And when it comes to correcting negative externalities, let the market take care of that too. If someone is being harmed by a spillover from someone elses economic transaction, they should be able to settle on their own, the government should play no role in solving conflicts of interest in a free market. So, what do you think? Should the future be a place of more or less government in the economic lives of the people in free countries? Discuss. It is true that less and less the government should interrupt the economic circulation made by the free markets. However, there are some facts that still there are some sorts of economical problems that cannot be solved JUST by the free markets working for their own benefits or the invisible hands. By inferring fro the Coase Theorem, with an unclear property ownership defined, an immense number of people involved and high bargaining costs, it would be hard to solve these problems without the touch of the governments' hands. 0 out of 1 found this valuable. Do you? |
Christinah |
28. RE: Role of government
Jan 20 2008, 10:31 AM EST
I totally agree. The whole purpose of a government is to keep people under control and regulate national issues that could not otherwise be controlled. The government should practice laissez-faire as much as possible, and let the invisible hand do all the work, but it does need to provide certain essentails such as health care and education which almost always have spillover benefits.
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SharonLi |
29. RE: Role of government
Jan 20 2008, 10:35 AM EST
With too little government intervention, we risk the 'tragedy of the commons'. The Coase Theorem presents a free-market method to correct externalities, but it does have its limits as to how and when it can be applied. So, the government will always need to play some role in the economy in alleviating negative externalities- it's the quickest way to fix problems that would otherwise take too long with just a free-market.
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Christinah |
30. RE: Role of government
Jan 20 2008, 10:39 AM EST
A completely free market is a great idea, but, let's face it, the extremes are almost never good. Sure, people can use the Coase Theorem to solve problems and come to agreements, but there are very specific requirements for the theorem to work. In cases with third parties or undefined property or ambiguity, the government would have to act as an arbiter. Also, everyone gets utility from consuming education, health care, transportation, and parks, but when it comes down to it, many people could not afford these goods and services if they had to pay for them just as rich people do. Then, even less people would receive educations and health care, etc, which would decrease the total utility of a nation as a whole. The government needs to provide those certain basics, because the public goods are the ones that everyone inevitably will use at one point or another, but that poorer people can not afford to use if they were made private.
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kevinchiu |
31. RE: Role of government
Jan 20 2008, 4:58 PM EST
I think that government intervention should occur only when there are problems that cannot be resolved through the free market itself; public goods and services, that are necessities such as health care, would need government intervention in a free market because those who can afford it already have it, however those that cannot afford it suffer. These type of public goods help society overall through their social-benefits.
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rksung |
32. RE: Role of government
Jan 21 2008, 3:17 AM EST
It is sometimes hard for people to come to a decision that all the parties can agree on, so the government plays the role of the mediator. As for paying for education, I agree with Christina; the government needs to provide this essential because it almost always has spillover benefits. If education was not provided by the government, a portion of people would not be able to afford to be educated. These people will not be getting the education needed to obtain an even average-paying job; thus, it is most likely that they cannot afford to provide their children with the proper education and it becomes a cycle. Society will have to deal with the many problems accompanying the lack of education of the people. Same with health care: again, if health care was not provided, it would be a great burden to the government with all the spreading of diseases, etc.
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rksung |
33. RE: Role of government
Jan 21 2008, 3:18 AM EST
It is sometimes hard for people to come to a decision that all the parties can agree on, so the government plays the role of the mediator. As for paying for education, I agree with Christina; the government needs to provide this essential because it almost always has spillover benefits. If education was not provided by the government, a portion of people would not be able to afford to be educated. These people will not be getting the education needed to obtain an even average-paying job; thus, it is most likely that they cannot afford to provide their children with the proper education and it becomes a cycle. Society will have to deal with the many problems accompanying the lack of education of the people. Same with health care: again, if health care was not provided, it would be a great burden to the government with all the spreading of diseases, etc.
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drewvenkatraman |
34. RE: Role of government
Jan 21 2008, 4:13 AM EST
I believe that the government should not intervene in peoples affairs. If someone next to you is smoking, and you hate it.. then you should just tell them to put out their cigarette and "flash your guns." Conversely if you like that someone is getting vaccinated shouldn't you take some responsibility to spread the word about the positiveness of these vaccinations. I think that without government intervention people will be more willing to take care of themselves and not have to rely so much on others, ie the government
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rksung |
35. RE: Role of government
Jan 21 2008, 4:53 AM EST
It is sometimes hard for people to come to a decision that all parties can agree on, so the government plays the role of the mediator. As for paying for education, I agree with Christina; the government needs to provide this essential because it almost always has spillover benefits. If education was not provided by the government, a portion of people would not be able to afford to be educated. These people will not be getting the education needed to obtain an even average-paying job; thus, it is most likely that they cannot afford to provide their children with the proper education. This results in a cycle. Society will have to deal with the many problems accompanying the lack of education of the people. Same with health care; if it was not provided, the effects would be a great burden to the government (examples: spreading of disease).
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rksung |
36. RE: Role of government
Jan 21 2008, 4:56 AM EST
oops sorry....posted the same thing twice
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CalebLiao |
37. RE: Role of government
Jan 21 2008, 5:31 AM EST
Uhh no! If there was a true market economy one that is suggested by Adam Smith, there would be a heavy imbalance in the distribution of resources. The ideals of a pure market economy are not feasible, for if they were, the US would not have taken control over parts of the market economy and enforced laws. Government intervention in any type of economy is cruicial for provided a stable structure for economic transactions to convene in the safest manner possible.
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MondGu |
38. RE: Role of government
Jan 21 2008, 6:31 AM EST
The government should be more actively involved in the market. Look around us, global warming, air pollution and other types of pollution/environment issues can be seen. They should take more control of the situation instead of silently observing and guiding the market. Many negative externalities could not be resolved without government intervention, many of these goods are often inelastic. Which means there is a profit to be made by the supplier, now why in the world would the producers sacrifice those profit and produce less? Government intervention is crucial to the markets economy. Without it, the world would be a mess.
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HowardJing |
39. RE: Role of government
Jan 21 2008, 6:58 AM EST
I really would not want to live in a country using a pure market economy. Eventually companies become corrupt as they start having to cut costs to stay competitive. Just look at 1890s US, where an unregulated food industry meant you were getting shredded rat meat in your sausages. The government is required to oversee the various industries within a country to make sure that its people aren't consuming dangerously shoddy products.And what about public goods? I get utility from policemen, firemen, and (when I lived in the United States) public education. Politicians and economists can't possibly suggest for the individual to pay their own private security firms whenever they get robbed, or their house catches on fire. What happens if you are too poor to pay for it? Better luck next time? If public schools are shut down in favor of private schools, how can the poor educate their children? Wouldn't they be doomed to the same blue collar jobs that their parents held? How would one advance in society under a completely modern market economy? 1 out of 2 found this valuable. Do you? |
