intervention

Examples of intervention in the following topics:

• Government Failure

  • Government failure occurs when possible interventions are not analyzed before action is taken regarding market inadequacies.
  • The market fails and government intervention causes a more inefficient allocation of goods and resources than would occur without the intervention.
  • It occurs when the market inadequacies are not compared and analyzed against possible interventions before action is taken.

• Mixed Economies

  • However, to mitigate the negative influence that a pure market economy has on fairness and distribution, the government strongly influences the economy through direct intervention in a mixed economy.
  • Most government intervention in mixed economy is limited to minimizing the negative consequences of economic events, such as unemployment in recessions, to promote social welfare.
  • While mixed economies vary based on their degree of government intervention, some elements are consistent.

• Types of Private Solutions

  • Private actors will sometimes effectively address externalities and reach efficient outcomes without government intervention.
  • Government intervention is not always necessary to address externalities.

• The Coase Theorem

  • The Coase theorem states that private parties can find efficient solutions to externalities without government intervention.
  • The Coase Theorem, named after Nobel laureate Ronald Coase, states that in the presence of an externality, private parties will arrive at an efficient outcome without government intervention.

• Why Governments Intervene In Markets

  • Government intervention through regulation can directly address these issues.
  • Another example of intervention to promote social welfare involves public goods.
  • Other examples of market intervention for socio-economic reasons include employment laws to protect certain segments of the population and the regulation of the manufacture of certain products to ensure the health and well-being of consumers.
  • Most people agree that governments should provide a military for the protection of its citizens, and this can be seen as a type of intervention.

• Laissez-Faire Versus Government Intervention

  • Smith did favor some forms of government intervention, mainly to establish the ground rules for free enterprise.
  • Liberals have been much more likely to favor government intervention that promotes a variety of non-economic objectives, while conservatives have been more likely to see it as an intrusion that makes businesses less competitive and less efficient.

• Arguments For and Against Fighting Recession with Expansionary Fiscal Policy

  • Taxes have not only been a way to initiate fiscal policy intervention, but have also been used to solidify popular approval.
  • Evaluate the pros and cons of fiscal policy intervention during recession

• Classical Theory

  • Self-regulating markets: classical theorists believed that free markets regulate themselves when they are free of any intervention.
  • Adam Smith referred to the market's ability to self-regulate as the "invisible hand" because markets move towards their natural equilibrium without outside intervention.

• Supply Reduction

  • Agricultural aggregate supply can be reduced through external capacity potential or governmental interventions.

• Keynesian Theory

  • The Keynesian School of economic thought emphasized the need for government intervention in order to stabilize and stimulate the economy during a recession or depression.
  • In contrast, the Chicago School of economic thought focused price theory, rational expectations, and free market policies with little government intervention.