Types of Government Failure
A handy way of remembering the different types of government failure.
- Created by: B_R_D
- Created on: 13-03-14 17:21
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- GOVERNMENT FAILURE (PRESIDE-nt)
- P
- Political bias
- Favouring voters and constituencies in intervention
- Political bias
- R
- Regulatory capture
- The illegitimate (usually financial) influence of industry regulators by firms. Also occurs in political lobbying.
- Regulatory capture
- E
- Evasion of intervention
- Tax avoidance and breach of pollution controls
- Evasion of intervention
- S
- Short-term planning
- UK transport network. Exacerbated by the short lives of governments.
- Short-term planning
- I
- Imperfect Information
- Gvt. does not have perfect information regarding consumer's and taxpayer's preferences or economic activities.
- Taxes on demerit good; who do they hit hardest?
- Gvt. does not have perfect information regarding consumer's and taxpayer's preferences or economic activities.
- Imperfect Information
- D
- Disincentives
- Where gvt. intervention produces a disincentive to productive economic activity. An example might be welfare payments above the equilibrium Wage Rate.
- Disincentives
- E
- Gvt. expenditure
- The gvt. costs of creating and administering an intervention might be vastly greater than the social benefits.
- Gvt. expenditure
- nt
- Unintended consequences
- People can act in ignorance/error and gvt. failure can result
- Unintended consequences
- P
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