Government and Market Failure

In microeconomics, market failure is characterized by resource mismatch followed by Pareto inefficiency. Like invisible hands, regulated markets can not solve all economic problems. In the free-for-ease economy, the market model is primarily monopoly, complete competition and oligopoly, and it is expected that resources will be allocated effectively for "social welfare" of society. But individualism and selfish private interests bypass public interests and encourage government intervention to correct imperfections that could lead to catastrophic economic consequences.

Market economic theory highlights freedom of choice and limited government intervention. The classic argument against government intervention is market failure - the market economy can not modify itself from a dysfunction state (such as the Great Depression). Students review articles from university libraries, analyze examples of US government intervention programs, and apply the current weekly reading to make informed conclusions about economic policy.

First, I will examine how government interventions can fix market failures. If distribution of goods and services in the free market does not bring economic efficiency, market failure will occur. According to fiscal policy, governments often use government expenditure for infrastructure, education, medical care, subsidies, etc. to prevent market failure. However, the roles of fiscal policy of developed and developing countries can be significantly different, and fiscal policy of developed countries is often used to maintain full employment and stable growth.

Richard Posner created the term "Government Failure" and became a mirror of "Market Failure". The market failure means that while someone is thinking of buying something, it means that other people are trying to sell it, but the market situation is like a transaction does not happen. When the government failed, people told the government what they wanted, but the government could not do so. Both situations occasionally occur and both are prevented with sufficient effort. Democracy has another advantage over other forms of government: the cycle of feedback to peace, the system of destructive control, and the ability to dismiss a corrupted agent without a bloody revolution. As philosopher Carl Popper said, "Democracy is not about choosing the best leader, it's about preventing too much harm from bad leaders"

Deregulation is a form of government failure. Government failures, also called market failures, are incomplete government performance. The way to capture the regulation is one of the ways to seek rent - trying to gain greater market wealth without creating extra wealth in the market. According to official choice theorists, individuals and groups that are at high risk of being interested in specific policies or regulatory decisions will focus naturally and try to get the most appropriate policy results for them. The results have very little personal concern, but it may be completely ignored.