Discussion #3 The role of governments in the economy is one of the most debated
ID: 1098639 • Letter: D
Question
Discussion #3
The role of governments in the economy is one of the most debated issues in economics. Similarly, one of the most enduring debates of U.S. economic history focuses on the role of government in the economy. On the one hand, it is argued that government regulation of the economy is too little and too late. On the other hand, there is also a claim that the U.S. economy is no longer a free market due to too many regulations.
Moreover, the causes of economic and financial crises have been parts of the larger debate on the role of the government in the economy. Some argue that the accumulation of incorrect policies and lack of effective policies led to the recent and other economic and financial turmoil (crises). Accordingly, the failures of the main entities that manage our economy, which are the Congress, the executive branch of the Federal government represented by the Treasury Department, and the Federal Reserve System, lead to economic and financial crises. The other side claims that it
Explanation / Answer
1. What are the roles of government in the market economy?
To make and maintain the constitution, particularly regarding law and order.
To tax and spend, so as to maintain the well-being of its citizens, some of which are too capable of exploiting or deceiving others and others of which are less capable of success or even disabled and unable to manage without help.
To aid and participate in public celebrations, civic duties, international relations.
To allocate financial help for charitable needs where the general well-being role is not apparent.
To protect the public from evil-doers, drunks, drug users, thieves and criminals of various kinds.
To stop the ambitions of politicians from spoiling the various expressions of fair social behaviour and uniform opportunities to earn and live normal lives.
To protect the country from the effects of war and terror.
To give support to scientific intuitions whose work will result in better technologies, less pain and suffering, better general life-styles. To support some of the arts too.
2. Based the current economic conditions, to what extent should the government intervene in the market economy?
The government should intervene and save failing businesses in order to maintain a viable economy. The government should intervene with the free market and save failing business of a large size that through failure can send a recessed economy into a depression. Intervention should only apply to extremely large employers of 1,000 or more employees, with a clear and concise plan to repay monies and a design of how they will be spent by the businesses.The market system is made up of product and services. So much currency changes hands like clockwise and government intervention is necessary to make sure all of the money flow through market system clockwise. Markets and prices are key elements of the market system and government must stay proactive in regulating the monitoring the market system. If they don't someone else will.
Example - Free trade started with George Bush with NAFTA and Bill Clinton signed into law while in office then George W Bush passed Free trade with a number of countries such as Chine, India and the list keeps growing today with our current president South Korea among others. This is whats killing factory jobs in this country so yes the government created the problem so the government should intervene to make the playing field a little more equal. The U.S. cant compete with Slave labor or low pay, counterfeit products.
3. What are the justifications given in favor of more government involvement in the market economy?
Role of government in a market economy
The government has a limited role in a market economy like the USA.
In a market economy the invisible hands of demand and supply play a central role by determining the price of everything.
The government should play a role in overseeing the working of the economy, but should not intervene in its day to day functioning.
The government does not need to micro-manage the economy.
The government needs to provide those goods and services which have high social priority but very low profit margin.
For example building social infrastructure like highways, bridges etc.
These are an integral part of economic development, but private investment would normally not flow into these ventures since they are not profit generating.
Roads, highways, bridges, hydro-electric projects are all in this category.
Hence the government needs to be involved in these projects.
Government should be involved in national defense, police, law and order, fire department, postal service etc.
The government should intervene in the market pricing mechanism only in the two accepted exceptions like "price ceiling" and "price floor" where the pricing mechanism on its own does not give very desirable results.
The government should make the overall rules and regulations which are binding on the private sector.
All firms and businesses need to follow them.
It is the role of the government to go after the law breakers, crooks etc.
An important role of the government in a market economy is to spell out (in writing) the boundaries within which business should function.
What is legal, and what is not!
After that the government should let the forces of personal initiative, human ingenuity and hard work play freely in the economy.
The government again should not micro-manage the functioning of the economy.
The government needs to set up the legal structure like for example anti-trust laws which can be enforced if a company is trying to usurp market power in their hands.
Preventing the concentration of monopoly power in few hands is a very important aspect of the governments "job description" in a market economy.
The government through this law should see to it that competition is maintained in the market place.
The government should do this by creating a strong court system which can effectively apply the "rule of law."
The rules for strong