Government Intervention in the Economy

 

Government Intervention

To correct for Market Failure the Govt will often provide goods and services directly. These services will be free at the point of use and paid for out of general taxation e.g.

• National Health Service,
• Education,
• Training,
• Waste disposal

 

The Reason for Govt Provision is

• Merit Goods: people do not realise or underestimate the benefits of education or health
• Positive Externalities. The consumption of health care services has benefits to the rest of society. Therefore will be underprovided in the private sector.

• Economies of scale in providing National Service
• Providing an universal service leads to greater equality of distribution. In a free market some would be unable to afford to pay.
• Minimum Service Standards:  important for public services such as health. The private sector may cut costs by cutting quality of products

 

Essays and Revision Notes on Government Failure

• Government Failure
• Privatisation of Public Services
• Should We Pay for NHS?
• Rationing and the NHS
• Why Government Intervention ?
• Market Failure
• Buffer Stocks

 

• Government intervention at Treasury.gov.uk