Costs of Government Spending.

Readers Question: Can I enquire about the costs of using the supply-side interventionist policies? Thank you.

Interventionist Supply side policies are government policies that attempt to overcome market failure.

For example, the government may feel the free market fails to provide sufficient education and training for young workers. Therefore, the government may offer free vocational training schemes to the long term unemployed to help them become more employable.

There is the financial cost of paying for the training schemes. This will be paid for out of tax revenues.

Also, you could argue government intervention tends to be inefficient. E.g. the government may not know the best type of training to provide. Or maybe the schemes are not well used. Government schemes can lead to ‘white elephants’ Policies that do little to improve the economy.

Another issue is building infrastructure projects. maybe government will rush throw schemes that are not particularly useful or needed – or cause other problems.

There is also the potential cost of crowding out. – Higher government spending causes lower private sector spending. And critics argue private sector spending is more efficient.