Question

List three examples of when the government should not intervene the free market. Explain why you think they should not.

Answer 1

1. Governments liable to make the wrong decisions -influenced by political pressures groups, they spend on inefficient projects which lead to an inefficient outcome.

2. Government intervention takes away some personal freedom .

3. Market is best at deciding how and when to produce.

Because When government spend on public goods or merit goods , they may create bureucracy and inefficiency. State owned industries tend to lack any profit incentive and tend to be run inefficiently. Politicians don't have the same market discipline of seeking to maximise the use of limited resurces. Government intervention causes more problems .Some theorists argue that government intervention makes no difference to the recession, but may create additional problems such as accumulation of public sector debt.