Wednesday, May 18, 2011

What according to you are the areas of the economy where government intervention is considered desirable?

What according to you are the areas of the economy where government
intervention is considered desirable?

Answer. GOVERNMENT INTERVENTION: Actions on the part of government
that affect economic activity, resource allocation, and especially the voluntary
decisions made through normal market exchanges. Government, by its very
nature, is designed to intervene in voluntary market activity. Some of the more
common types of government intervention includes taxes, price controls,
assorted regulations, and control over government spending. The general
justification for government intervention is that voluntary decisions by consumers
and businesses fail to achieve efficiency or other goals deemed important by
One of the major area in which the government intervenes is in the agricultural
sector of the economy. The government has three ways it can intervene and help
its producers. These ways include price policies, direct payments, and input
policies. Price policies have the largest effect on producers. Tariffs, quotas, and
taxes are just a few examples of price policies. While these policies bring
revenue into the government, in the end they hurt consumers. Each of these
policies raise the prices of both imported and native goods. They are designed to
help stabilize prices and give the native producers a chance to compete with
foreign goods. Under the doctrine of laissez-faire, the government would not
interfere with prices and the native producers would be forced to lower their
prices, giving the nation’s citizens a better deal in the market.
The government not only intervenes in the agricultural sector of the economy, it
also intervenes in the business sector. The ways it can do this are innumerable,
but some of them are strict safety and health regulations, tariffs, and subsidies
and government loans. The use of tariffs is another way that government
intervenes in the business sector. Subsidies and government loans are another
method of intervention for the government.
Areas where Government Intervention is Desirable
Government intervention is not necessarily bad, although it has been generally
accepted that the best government policy for the growth of a nation's wealth is
that policy which governs least. There are some essential services that simply
will not be provided by the market without the support of government: either the
services are financially not viable, or the charges for the services are too high for
the less well-off to bear. There are examples of government intervention
everywhere. The physical infrastructure - roads, tunnels and bridges - to allow
the safe movement of people and products, and the financial infrastructure -
payment, settlement and clearing systems - to enable the safe mobility of money
are essential to economic wellbeing. The upholding of law and order, taking care
of those members of the community who are less able to take care of
themselves, education and housing all involve government intervention to varying
degrees. Whether or not government intervention is desirable in a particular case
is always debatable. It is tempting, particularly when bureaucrats do not wish to
take on responsibilities, to argue against intervention. It is equally tempting, when
particular sectors of the economy are experiencing difficulties, to argue for
government intervention, even if that means committing taxpayers' money to
sustaining activities that are destined to fail. Politics and vested interests often
come in, and emotions may run high. It is for those responsible in government to
weigh the pros and cons of government intervention and those of leaving things
Government undertakes market study to understand the competition and hence
the assumption regarding nature of market, etc. All the types of goods are not
taken into account in analysis process. Government makes plans to ensure that
there exists a perfect competition among buyers and sellers, and the sellers are
guided by small quantity of product. Both are guided by economic consideration.
Thus government intervention is needed for optimal resource allocation, high
prices, excessive advertising.
Government intervention is also required to make sure that the industrial units
don’t bother each other and there lies harmony. This is implemented through a
set of protocols that must be followed. For example, Noise control.
Government has set up rules for quality products. For this every production unit
has to pass the quality test for its goods before being able to be marketed. ISO
standards etc, are outcomes of such government interventions.
Free market economies require the government monitoring through a policy of
monetary and fiscal combination. This ensures stability in employment, national
income, price, etc.
Inequalities of profit distribution has led to gap between the income groups.
Moreover there is uneven distribution of income in various groups. Government
intervention is necessary here.
Government intervention is also desirable in education. More subsidized schools
and institutes should be opened for backward class people.
Governments intervention is desirable in nuclear energy matters. The reasons for
government intervention in nuclear energy have evolved as governments
confront their limits. Privatization and competition mean that many decisions are
no longer directly made by governments. However, there will always be strategic
reasons for government intervention – national security; emergencies, disasters
and health crises; national projects of such importance or urgency that only
government can do the job.

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