Advantages of government intervention in the economy

Markets only relied on deciding charges for reference allocations and reaching the requirements for rations.

Advantages of government intervention in the economy

Should the government intervene in the economy? Tejvan Pettinger economics One of the main issues in economics is the extent to which the government should intervene in the economy.

Free market economists argue that government intervention should be strictly limited as government intervention tends to cause an inefficient allocation of resources. However, others argue there is a strong case for government intervention in different fields. Hoover Dam built in the s with government funds This is a summary of whether should the government intervene in the economy.

Arguments for government intervention Greater equality — redistribute income and wealth to improve equality of opportunity and equality of outcome.

Advantages of government intervention in the economy

For example, governments can subsidise or provide goods with positive externalities. Arguments against government intervention Governments liable to make the wrong decisions — influenced by political pressure groups, they spend on inefficient projects which lead to an inefficient outcome.

Government intervention is taking away individuals decision on how to spend and act. Economic intervention takes some personal freedom away. The market is best at deciding how and when to produce.

Arguments for government intervention to improve equality In a free market, there tends to be inequality in income, wealth and opportunity. Private charity tends to be partial. Government intervention is necessary to redistribute income within society.

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Diminishing marginal returns to income. The law of diminishing returns states that as income increases, there is a diminishing marginal utility.

For example, your third sports car gives only a small increase in total utility. Therefore, redistributing income can lead to a net welfare gain for society. Therefore income redistribution can be justified from a utilitarian perspective. In a free market, inequality can be created, not through ability and handwork, but privilege and monopoly power.

Without government intervention, firms can exploit monopoly power to pay low wages to workers and charge high prices to consumers. Without government intervention, we are liable to see the growth of monopoly power. Government intervention can regulate monopolies and promote competition.

Therefore government intervention can promote greater equality of income, which is perceived as fairer. Often the argument is made that people should be able to keep the rewards of their hard work.

But, if wealth and income and opportunity depend on being born into the right family, is that justified? A wealth tax can reduce the wealth of the richest, and this revenue can be used to spend on education for those who are born in poor circumstances. Using this social contract, most people would not choose to be born in a free market because the rewards are concentrated in the hands of a small minority of the population.

If people had no idea where they would be born, they would be more likely to choose a society with a degree of government intervention and redistribution.Jun 26,  · barnweddingvt.com: Advantages and disadvantages of market economy, command or planned economy and mixed economy About the Author Living in Houston, Gerald Hanks has been a writer since Pros and Cons of Government Regulation on the Economy Types of Government Regulation Social: "refers to the broad category of rules governing how any business or individual carries out its activities, with a view to correcting one or more market failures.”.

Aug 13,  · "The nine most dangerous words in the English language: We're from the Government, and we're here to help."-President Ronald Reagan, An . All manner of benefits are theoretically possible from government intervention in an economy, but the reality differs from what looks good on paper.

In general you quickly get the government picking winners and losers. This usually comes in the form of heavy handed regulation, punitive taxation, or subsidies to government favored competitors. This is a summary of whether should the government intervene in the economy.

Arguments for government intervention Greater equality – redistribute income and wealth to improve equality of opportunity and equality of outcome.

Advantages of government intervention in the economy

A free market economy promotes the production and sale of goods and services, with little to no control or involvement from any central government agency. Instead of .

Pros and Cons of Government Regulation on the Economy by on Prezi