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Do We Need Government Intervention To Ensure An Efficient Allocation of Resources?

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Introduction

Do We Need Government Intervention To Ensure An Efficient Allocation of Resources? The Government as according to this article, is not the solution to a problem, it is the problem. While a government's intervention may seem helpful during the start, it does however distort the workings of the market system, hence leading to an inefficient allocation of resources. Policy proposals such as privatisation and compulsory competitive tendering are all examples of the application which has been described as the orthodox economic belief. The notion of economic or allocative efficiency is in way, the economic Holy Grail. As the basic problem of economics is scarcity, the allocation of resources most efficiently is the aim of an economist. The market system, in the majority of situations is the most effective mechanism to achieve allocative efficiency which can be shown from the earliest of times when flint axes would have been traded for fish. Trade would continue until both communities have gained the combination of goods which they want. ...read more.

Middle

Governments also exist to fill the gaps where markets do not, or can not exist, such as defence where the goods are non-rival and non-excludable and a free market would not be able to provide such public goods to a socially acceptable level. In many cases factor mobility has the problems of occupational immobility where skills can't be transferred and geographical immobility where jobs can't be transferred, government can intervene here by doing things like training. A final source of market failure shows that without government intervention, widespread and extreme inequalities are likely to emerge. A final conclusion states that for both, an efficient economy and a society in which we want to live require some government intervention. Why Would Public Goods Not Be Accurately Provided By A Free Market? Public goods which are provided by the government are actually not goods, but services and these services are amongst those which are non-rival, non- excludable and non-rejectable. ...read more.

Conclusion

There are the grey areas in the public goods. A perfect example of this would be knowledge. Is knowledge a public good? By one person knowing something that doesn't stop anybody else from knowing the same thing. As long as the knowledge is part of the public domain, no one can be stopped from leaning it. But not all knowledge is known. There are government cover-ups to all sorts of things causing an exclusion of knowledge. In conclusion, we see that although the economist's definition of a public good seems simple and precise, there are a few problems. The free-riders problem for one which explains that many socially desirable goods and services would be under provided in the private sector, as well as this there are many goods which only fit the definition of a public good, partially, and yet are treated as a public good. There is a simple answer to the question of can public goods be provided adequately in the free market, and the free-rider problem means that the free market would not be able to provide public goods. ...read more.

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