Автор: Пользователь скрыл имя, 13 Ноября 2011 в 22:20, доклад
Economic interventionism is an action taken by a government in a market economy or market-oriented mixed economy, beyond the basic regulation of fraud and enforcement of contracts, in an effort to affect its own economy.
Economic interventionism
Economic interventionism is an action taken by a government in a market economy or market-oriented mixed economy, beyond the basic regulation of fraud and enforcement of contracts, in an effort to affect its own economy.
Economic intervention can be aimed at a variety of political or economic objectives, such as:
The term economic intervention assumes the state and economy are inherently separate from each other, and therefore applies to capitalist market or mixed economies where government action would make an "intervention" (although this does not apply to state-owned enterprises that operate in the market).
Economic planning in market economies is sometimes considered to be a form of intervention when it intervenes in the setting of prices and the distribution of goods determined by the market.
Economic planning tends to be associated with the political left, while economic interventionism is often associated with centrism, which believes that certain market outcomes are undesirable or ineffective and ought to be mitigated. Economic interventionism and planning are sometimes practiced by national conservative, fascist, economic nationalist and right-wing parties with the thinking that the free market can damage national traditions, social order, or the authority of the state itself.
Types of interventions
Economic interventions common in contemporary governments include:
Demand management and Keynesian economics (helicopter money) are sometimes cited as mild forms of economic planning, designed to overcome cyclical instability inherent in market economies, or to make market economies function properly in a desired fashion.
Related concepts
Economic planning refers to planned economic activity in production. Planned economic activity may be direct (directive planning), or indirect as in the case of indicative planning. An economic system that is characterized by the primacy of economic planning over the market is referred to as a Planned economy, where resource allocation and the quantity produced is allocated by non-market means, usually through state-led planning.
Government regulation can also be a type of intervention when it inhibits, corrects or distorts the market mechanism in setting the price of a good or service.
Effects
Advocates of free market or laissez-faire
economics tend to see government intervention in the economy as harmful,
due the fallacy of central planning, the law of unintended consequences,
and other considerations. Economically left-wing entities can see economic
interventionism as a way of ensuring that firms adhere to the social
boundaries of that country and that they often outweigh potential negative
unintended consequences. It is difficult to suggest precisely what effects
it will have on a given society.
AS Market Failure
Government Intervention in the Market
In a free market economic system, scarce resources are allocated through the price mechanism where the preferences and spending decisions of consumers and the supply decisions of businesses come together to determine equilibrium prices. The free market works through price signals. When demand is high, the potential profit from supplying to a market rises, leading to an expansion in supply (output) to meet rising demand from consumers. Day to day, the free market mechanism remains a tremendously powerful device for determining how resources are allocated among competing ends.
Intervention in the market
The government may choose to intervene in the price mechanism largely on the grounds of wanting to change the allocation of resources and achieve what they perceive to be an improvement in economic and social welfare. All governments of every political persuasion intervene in the economy to influence the allocation of scarce resources among competing uses.
What are the main reasons for government intervention?
The main reasons for policy intervention are:
Options for government intervention in markets
There are many ways in which intervention can take place – some examples are given below
Government Legislation and Regulation
Parliament can pass laws that for example prohibit the sale of cigarettes to children, or ban smoking in the workplace. The laws of competition policy act against examples of price-fixing cartels or other forms of anti-competitive behaviour by firms within markets. Employment laws may offer some legal protection for workers by setting maximum working hours or by providing a price-floor in the labour market through the setting of a minimum wage.
The economy operates with a huge and growing amount of regulation. The government appointed regulators who can impose price controls in most of the main utilities such as telecommunications, electricity, gas and rail transport. Free market economists criticise the scale of regulation in the economy arguing that it creates an unnecessary burden of costs for businesses – with a huge amount of “red tape” damaging the competitiveness of businesses.
Regulation may be used to introduce fresh competition into a market – for example breaking up the existing monopoly power of a service provider. A good example of this is the attempt to introduce more competition for British Telecom. This is known as market liberalisation.
Direct State Provision of Goods and Services
Because of privatization, the state-owned sector of the economy is much smaller than it was twenty years ago. The main state-owned businesses in the UK are the Royal Mail and Network Rail.
State funding can also be used to provide merit goods and services and public goods directly to the population e.g. the government pays private sector firms to carry out operations for NHS patients to reduce waiting lists or it pays private businesses to operate prisons and maintain our road network.
Fiscal Policy Intervention
Fiscal policy can be used to alter the level of demand for different products and also the pattern of demand within the economy.
(a) Indirect taxes can be used to raise the price of de-merit goods and products with negative externalities designed to increase the opportunity cost of consumption and thereby reduce consumer demand towards a socially optimal level
(b) Subsidies to consumers will lower the price of merit goods. They are designed to boost consumption and output of products with positive externalities – remember that a subsidy causes an increase in market supply and leads to a lower equilibrium price
(c) Tax relief: The government may offer financial assistance such as tax credits for business investment in research and development. Or a reduction in corporation tax (a tax on company profits) designed to promote new capital investment and extra employment
(d) Changes to taxation and welfare payments can be used to influence the overall distribution of income and wealth – for example higher direct tax rates on rich households or an increase in the value of welfare benefits for the poor to make the tax and benefit system more progressive
Intervention designed to close the information gap
Often market failure results from consumers suffering from a lack of information about the costs and benefits of the products available in the market place. Government action can have a role in improving information to help consumers and producers value the ‘true’ cost and/or benefit of a good or service. Examples might include:
These programmes are really designed to change the “perceived” costs and benefits of consumption for the consumer. They don’t have any direct effect on market prices, but they seek to influence “demand” and therefore output and consumption in the long run. Of course it is difficult to identify accurately the effects of any single government information campaign, be it the campaign to raise awareness on the Aids issue or to encourage people to give up smoking. Increasingly adverts are becoming more hard-hitting in a bid to have an effect on consumers.
The effects of government intervention
One important point to bear in mind is that the effects of different forms of government intervention in markets are never neutral – financial support given by the government to one set of producers rather than another will always create “winners and losers”. Taxing one product more than another will similarly have different effects on different groups of consumers.
The law of unintended consequences
Government intervention does not always work in the way in which it was intended or the way in which economic theory predicts it should. Part of the fascination of studying Economics is that the “law of unintended consequences” often comes into play – events can affect a particular policy, and consumers and businesses rarely behave precisely in the way in which the government might want! We will consider this in more detail when we consider government failure.
Judging the effects of intervention – a useful check list
To help your evaluation of government intervention – it may be helpful to consider these questions:
Efficiency of a policy: i.e. does a particular intervention lead to a better use of scarce resources among competing ends? E.g. does it improve allocative, productive and dynamic efficiency? For example - would introducing indirect taxes on high fat foods be an efficient way of reducing some of the external costs linked to the growing problem of obesity?
Effectiveness of a policy: i.e. which government policy is most likely to meet a specific economic or social objective? For example which policies are likely to be most effective in reducing road congestion? Which policies are more effective in preventing firms from exploiting their monopoly power and damaging consumer welfare? Evaluation can also consider which policies are likely to have an impact in the short term when a quick response from consumers and producers is desired. And which policies will be most cost-effective in the longer term?
Equity effects of intervention: i.e. is a policy thought of as fair or does one group in society gain more than another? For example it is equitable for the government to offer educational maintenance allowances (payments) for 16-18 year olds in low income households to stay on in education after GCSEs? Would it be equitable for the government to increase the top rate of income tax to 50 per cent in a bid to make the distribution of income more equal?
Sustainability of a policy: i.e. does a policy reduce the ability of future generations to engage in economic activity? Inter-generational equity is an important issue in many current policy topics for example decisions on which sources of energy we rely on in future years.
Free markets and government intervention
I am a fierce proponent of free markets. Therefore I am a fierce proponent of government intervention in the market.
Or, to put things less inflamatorily, one thing that often bothers me about US defenders of free markets is how easily they (and we) forget that free markets are created, maintained and curated by, well, the government. Free market conservatives often behave as if free markets are like a state of nature in which ham-fisted government arrives after the fact and wrecks everything when, in fact, it is the opposite. In a state of nature, you have permanent war. Traders and entrepreneurs can only exist once you have a Leviathan to enforce things like private property, money and contracts — all things created and maintained by the State. The rules of the market are set by the State. And if the State doesn’t intervene — justly — in the markets, you cannot have a free market.
To use a more down-to-Earth example, in France retail prices are on average 20% higher than in Germany (and this even though Germany has a higher VAT). Why? Because retail in France is a cartel. France’s big retailers hold local monopolies that they do not contest from each other. Government regulations also play a role — zoning laws prevent the opening of “big box” suburban stores to protect central “mom and pop” stores and other laws make it hard to “squeeze” suppliers. But the big companies have created a comfortable cartel. To create a free market there would require government intervention. Negative intervention, to be sure — scrapping wrongheaded regulations —, but also positive intervention, i.e. good ol’ trust-busting. It is the government’s refusal to step in which is stifling free markets, not the other way around.
Free markets require a strong and active government. The US is a “more free market” place than “Europe” (insofar as these broad strokes mean anything), in part because it has a government that is less high about maintaining a free market. There was never any trust busting in France.