Friday, May 02, 2014

What are some examples of Government Faliure?


The following provides a justification for either government intervention on market failures or the antithesis, suggesting a need for less government intervention due to government failure.

a. Interstate Highway Grants are federal grants for states to maintain and construct the interstate highway system. First, we must analyze whether road construction could be provided by a purely-private market. Roads could and are made in the open market; they are both excludible and rivalries. In order to make them non-rivalry, toll roads are built. But if the ideal is to ensure that the highway connects every state in the union, this makes inter-state highways a non-excludible and non-rivalries type of market. Therefore, if you believe that it is important to unify the country through the inter-state highway system, this is a perfect example of how government can intervene into the market place to provide a public good. That is not to say, many people object to the formula devised by Congress which assess the allocation of the resources, which could be conceived as a government failure, depending upon your state’s specific appropriation.

b. Environmental Protection creates a positive externality for all of us and for future generations. The EPA’s regulations on the environment especially for water and air pollution protects the American people from harmful and potentially life threatening diseases and lifestyles. Air pollution, for example is a public good, a non-exclusive- non-rivalry market. Factories would over pollute as much as they wanted without the consequence of paying a fine. Plus if they over polluted there would be a negative externality for those living in the area and had to breath in the bad air. Furthermore, many people may have an Intertemporal Resource Allocation, or consume today all the products from our forests, coral reefs, fish stocks, oil, species, etc., all the without harvesting regulations and preservation acts to take care of them. Yet with all these overarching benefits to America, some business argue there is over supply of regulation, they find the bureaucracy over cumbersome and even other have difficulties applying for permits suggesting potently bloating of the system.

c. Media Regulation is the FCC’s regulation of the electromagnetic spectrum to allocate permits for companies to use specific frequencies for radio and TV stations. The frequencies themselves, without the regulation, fall in with the tragedy of the commons or a common pool resource problem because they are is rivalry and they are not excludible. Scientists suggest that is an infinite number on the spectrum and therefore should be regulated. Furthermore, it can be argued that the FCC prevents a monopoly of media provided to the public. The FCC’s regulations were copied from the ICC model discussed further later.

d. TANF is the US welfare program to assist children living in poverty. Child poverty is a problem of Acceptability of Preferences. Americans, for one reason or another, deems it unacceptable. Often suggesting it’s Moral Unacceptability because children do not predicate where they are born. Furthermore, providing aid to children can be considered a positive externality or a tax benefit to needy families who fall below the poverty line. The government aid also helps the local economy of where the families live and spend the money.

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