Government Intervention in a Mixed Economy
Create a thesis and an outline on Government Intervention in a Mixed Economy. Prepare this assignment according to the guidelines found in the APA Style Guide. An abstract is required. However, the magnitude or the level of government intervention differs from country to country depending upon several reasons (Deardorff 2000, p3).Some of the reasons why a government needs to intervene in an economy relate to the microeconomic environment and some of them are connected to the macroeconomic conditions in the country. In the case of microeconomic interventions, government regulation of the private industry may further be divided into economic and social regulations (Deardorff 2000, p3). Economic regulations refer to the control over the prices of commodities, protection of consumers and other small firms form powerful economic agents and reinforcement of competitive forces in the market economy. On the other hand, social interventions involve decisions concerning a better workplace, cleaner environment, etc. (U.S. Department of State).In the same way, there are a number of other economic circumstances that call for government intervention which assistss the market forces in their smooth operations. First of all, governments may provide information to the economic agents and then assure a smooth flow of information in the market. Secondly, in case of negative where unwanted demerit goods are produced as well as positive externalities where lesser merit goods are produced by the economy- cases of market failure- governments need to play a role to mitigate the magnitude of the welfare loss (Deardorff 2000, p4). Thirdly, governments must provide public goods that the market would fail to supply to the general public. Fourthly, the government must reduce or control the development of non-competitive behaviour based on the assumption of economic rationality of self-interest which causes market distortions like the development of monopolies, price-leaderships, exploitation of small firms and consumers by large firms, etc.