Why do Governments Intervene in the Markets
The government has power over a lot of things and one of those is the country’s market, Governments intervene in the markets in order to address efficiency in the market and to make that resources are distributed to the different sectors according to the needs of the Sector or department.
In an inefficient market some sectors may have too much resource while others may not have enough, this is the reason why Governments intervene, inefficiency can come in different forms and the government tries its best to combat these imbalances by regulation, taxation and subsidies
As mentioned above there are different types of intervention, another example of this is the promotion of social welfare that involves public goods. Certain goods that can be diminished are those that aren’t owned by an individual, these goods can be easily regulated.
Another reason for the Governments to intervene is to minimize the damage that is caused by a naturally occurring economic event, like recession and inflation which are part of the natural business cycles but can have a disastrous effect on citizens. If these occur governments intervene through subsidies and manipulation of the money supply in order to lessen the negative impacts of economic forces in the country.
Governments also intervene in the markets to promote other goals, such as national unity and advancement. Most people agree that governments should provide a military in order to protect its citizens and this can be seen as a type of intervention. Producing an impressive military will not only increase a country’s security, but can also be a source of pride for the country. Intervening in a way that promotes national unity and pride can be very advantageous goal for the government officials.