• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

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

Extracts from this document...

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.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Economy & Economics essays

  1. The mixed market economy and the allocation of resources.

    Inefficient firms do not close and that leads to more loss and bad quality. In some cases this leads to the governments using completely other mechanism to allocate resources such as queuing, rationing, subsidising and again this can leads to black markets and corruption.

  2. Outline the reasons why the process of industrialization in developing countries might require government ...

    if Zambia were to encourage FDI then perhaps that would improve their predicament. Although here we do not have all the data for Tanzania, the United Nations Environment Programme declares in its 'Investing in sustainable business' report that Tanzania has offered incentives to invest in its country in an effort

  1. The efficient market (socially desirable) equilibrium levels of price and output. What action might ...

    2003, p. 268). (MP= (Change in Output) / (Addition in No. of workers)). Average Product (AP) is the output produced by each unit of input (workers). (AP=Output / Number of Workers). Fixed Costs (FC) are the "costs which do not vary with the quantity of output produced" (Gans, et al.

  2. The Quest for Optimal Asset Allocation Strategies in Integrating Europe.

    possibilities set, the probability distribution of asset returns (describing the investor's subjective expectations about the future), and the investor's utility function (describing the investor's investment objectives). However, since we do not know the precise shape of the expected utility framework, or the probability distribution of returns, the mean-variance framework is a popular approximation to the expected utility framework.

  1. The allocation of resources

    Participants engage in information bias practices such as insider trading and price fixing. Some believe that the notion of a free market is inherently unachievable because they believe that governments are fundamentally involved in markets through the creation and enforcement of property rights.

  2. Retailing In India - A Government Policy Perspective

    The same retailing company also tops Fortune's list of top 500 Global companies. With annual sales at a whopping $220 billion, Wal-Mart symbolizes the immense potential inherent in the organized retailing industry. Retail, with worldwide sale of US$ 6.6 trillion, is the world's largest private industry.

  1. Do we need government intervention in the form of Competition Policy? If so, why?

    Competition here is viewed as the guardian of economic efficiency and greater consumer power. When an industry is imperfectly competitive, each firm in the industry enjoys a degree of monopoly power. Equating marginal cost and revenue, each form will produce an output at which price exceeds marginal cost.

  2. Managerial Performance and the Need for Data.

    These studies are developed by independent bodies or by specialized research institutions - Statistical surveys containing local, regional or national economic data - Country reports - Foreign market reports etc, etc. All these data needed by a competition facing management might be also structured according the level of coverage of

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work