1.4 Government Intervention Flashcards
(7 cards)
what is government failure
when the costs of government intervention outweigh the benefits of it
what is the consequence of government failure
worsening of the allocation of scarce resources, harming social welfare
what are the causes of government failure
information failure for politicians
very high admin & enforcement costs
unintended consequences
regulatory capture
how does information failure affect government failure
incorrectly valuing externalities, and therefore the level of policy required
how do high admin & enforcement costs affect government failure
high costs of enforcing regulations
high costs of implementing subsidies and state provision
high costs in enforcing and maintaining price controls
how do unintended consequences affect government failure
creation of black markets
negative impact on the poor
negative impact on firms
negative impact on employment
firms dependence on subsidies
XSD of state provided G/S
how does regulatory capture affect government failure
when CEOs/managers of firms can influence
