government failure
- Created by: annie.m13
- Created on: 27-04-18 15:09
View mindmap
- government failure
- causes
- political self interest
- leads to a missallocation of resources
- pressure groups and major corporations can influence the decision
- leads to a missallocation of resources
- policy myopia
- myopia = the quality of being short-sighted.
- when decisions are made without taking into consideration the longterm effects
- e.g. subsidies
- if the market is unable to support itself then subsidies may keep businesses open longer than they should be
- regulatory capture
- when industries under the control of a regulatory body appear to operate in favour of the producers ratther than consumers
- may prevent a market from operating freely
- e.g. agriculture, household utilities, transport regulation
- disincentive effects
- mainly seen as a problem by free market economists
- says that policies like minimum wage can cause real wage unemployment as it artficially raises wages
- government intervention and evasion
- if the government rises tax on demerit goods and it increases tax evoidence/black makrkets
- policy decisions based on imperfect information
- the gov can never know what everyone wants
- a full cost-benefit analysis may not have been completed
- the law of unintended consequences
- all decisions have effects that are unanticipated or unintended
- not really the govs fault as they cant predict how everyone will react
- costs of administration and enforcement
- the estimated social benefits of a policy may be outweighed by the administrative costs
- political self interest
- free market economists rae distrustful of anytype of intervention
- belive the price mechanisms should be trusted
- causes
Comments
No comments have yet been made