2.11 Government Intervention (PUBLIC PRIVATE PARTNERSHIPS PPP) Flashcards
(8 cards)
what are public private partnerships
occur when government agents and private sector businesses create an agreement to provide public sector services
where does the private finance initiative occur (PFI)
occurs where the private sector finances and operates services but is paid by the government to run them
this means the government reduces its capital expenditure and it doesn’t have to pay the initial capital costs of large scale investment e.g. building schools
private firms therefore finances the infrastructure of the UK but with less risk as debt is underpinned by the government
Give an example of a public-private partnership
A private firm builds and maintains a hospital, while the government funds and oversees its operation (e.g. through a Private Finance Initiative).
What are the advantages of PPPs?
Access to private sector expertise and efficiency
Reduces immediate public spending
Encourages innovation and long-term planning
the incentive for profit means that resources will be allocated more efficiently
when the govt sells of their enterprise they will gain revenue that can be put to alternative use
What are the disadvantages of PPPs?
Can be more expensive in the long run
Risk of poor value for money
Less public control and transparency
How can government failure occur with intervention?
Government failure happens when intervention leads to inefficiency, higher costs, or unintended consequences (e.g., overregulation or misallocation of resources)
Why do governments intervene in markets?
To correct market failure (e.g. externalities, public goods), redistribute income, protect consumers.
What is government intervention in economics?
Government intervention refers to actions taken by the state to correct market failures, redistribute income, and promote economic stability and growth.
