Government’s Role in Correcting Market Failure, Essay Example

Introduction

Market analysts have through long experience discovered that an open market which has competition among its players is desirable compared to a command economy. However, without any external intrusion or government management, absolutely open, or laissez faire, market is evenly dangerous. It may result in a phenomenon called “market failure,” a situation that involves ignoring of the common good and community interests failing to receive proper attention and address. Government intrusion through consumer protection and regulations become necessary to help resolve such market failures (Samuelson & Nordhaus, 2006, p. 35).

Market Failure Examples

If there are no controls, free market economies, in most cases, result in unemployment across many sections in the society, unchecked pollution and high wealth distribution inequity. There are several instances we can cite involving such failures. Perhaps the best example is in the rampant devastation of the Amazon rainforests in Ecuador and Brazil by oil companies (Buccina, Chene, & Gramlich, 2013, p. 110). These countries have weak legislation, which has led to uncontrolled natural resource exploitation for individual gain. The health care sector in US is often an example of a malfunction in the achievement of a service delivery that is equitable. The failure occurs because of competitive excesses and profit taking. Even though the U.S. uses up nearly 18% of its GDP on health care, still there are uninsured or underinsured millions of the citizens. When compared to other developed nations, mortality statistics are poor, and clinical product is substandard (Woolhandler & Himmelstein, 2007, p. 1126). Correspondingly, manufacturers, in the apparel industry, frequently subcontract manufacture to developing nations where the poor in the society, children included work under horrific conditions.

Government’s Role

The government should come in during several occasions to provide a solution to the market flaws. For example, the United States has $7.25 per hour as the minimum wage; this aims to avoid exploitation of the labour market by organizations. In the same way, the government often develops a variety of environmental laws to ensure the protection of natural resources from exploitation. An excellent example involves the anti-fracking legislation under consideration in California that forces specific controls on oil companies desiring to mine, from underground pools, oil and natural gases (Valentine 2013). The Food and Drug Administration ensures consumer protection against malpractices and provides public health safety by acting as a quality regulator and supervisor.

Core Principles and Reliable Stewardship

Consideration the discussion, hitherto, it is worth to analyze why government involvement is indispensable in providing solutions for market failures by considering some core values of Saint Leo. Community and personal development are two values that are specifically vital. In a similar way to Saint Leo University emphasizing the establishment of socially responsible surroundings, the government struggles to guarantee that the population as a whole will receive better services. An example in this case is the Freshkills Park establishment in Staten Island, New York, and other places where private companies may find unprofitable (Foderaro 2011). Likewise, just as the University emphasizes individual establishment for all in order to direct a steady life, the government strives to ensure that communal education and critical healthcare services are accessible to all. Through such interventions, the society members develop into responsible citizens.

Conclusion

The core principles performed at the University demonstrate how government control in a market economy thwarts misuse and misconducts, promotes equity and builds life quality for the whole nation.

References

Buccina, S., Chene, D., & Gramlich, J. (2013). Accounting for the environmental impacts of Texaco’s operations in Ecuador: Chevron’s contingent environmental liability disclosures. Accounting Forum, 37, 110– 123.

Foderaro, L. (2011). From Dump to Paragon of Ecology: A First Peek. New York Times. Retrieved from http://www.nytimes.com/2011/09/30/nyregion/fresh-kills-once-a-landfill-is-environmentally-transformed.html?_r=0

Samuelson, P. A. & Nordhaus, W. D. (2006). Economics, 16^th Ed. New York: McGraw-Hill.

Valentine, K. (2013). California’s New Anti-Fracking Law Draws Opposition from Environmentalists And Big Oil. Climate Progress. Retrieved from http://thinkprogress.org/climate/2013/09/22/2662101/californias-anti-fracking-law-draws-opposition-environmentalists-big-oil/

Woolhandler, S., & Himmelstein, D. U. (2007). Competition in a publicly funded healthcare system. BMJ, 335, 1126-1131.