public economics assignment help

public economics assignment help

Public Economics: The Role of Government in the Economy

1. Introduction to Public Economics

The dictionary meaning of public is “of, belonging or forbearing to the people as a whole.” Our government does not produce goods and services with a view to making a profit. Instead, the outputs are made available to everybody so that the society as a whole can progress and grow. Thus, governing or the production of ethical and other extremes are called for in social service organizations which are getting laid. Thus, a special arrangement is needed for implementing and effecting a system whereby certain funds may become available for bearing public cost and for planning in the long term, medium term, and even short term. Such happenings could be fulfilled with adequate staff strength, trained and under constant self-education and basic qualifications, variegated views in different fields requiring their attention and observance. Such views will dramatically manipulate our national wealth and soon shape the growth in gross domestic product at a reasonable and sustainable level.

It is essential for the government to play a direct role in the provision of major goods and services, those which are indivisible, non-exclusive, and jointly consumable. People work together in a complex society to earn a living, and the government is now playing a larger role in our lives. The effects of government decisions are felt every day, and whether they like it or not, just about everyone is involved in the ongoing debate about their potential benefits and costs. Government decision-making on activities that concern all sectors of society and often touch on sensitive issues may be fraught with risk and uncertainty. But most people have accepted the argument that decision-making on national defense is an ordinary governmental activity. Other basic activities of the government may depend on the honesty, integrity, faculty, and ability of the citizens.

2. Market Failures and the Need for Government Intervention

Or, consider other functions commonly assigned to government, such as social insurance such as health care, job support, or unemployment and pensions. Why should the government’s poor behavior in these areas? Government intervention is desirable for economic or social reasons when private markets do not provide, and government involvement can improve both efficiency and justice. Policymakers should make decisions about design and safety regulations in light of facts and not the premises. Incidentally, what generates externalities is not the production process but consumption. It’s consumers who are demanding gasoline for their cars, and these purchases result in damages to the non-drilling sites where the drilling occurs. Demand leads to externalities, including their explanation by nature. Governments can have many reasons for participating in poor markets that have been shown by various situations to be unnatural for certain reasons unless they have a certain context attribute.

Why do governments intervene in the economy? Governments are justified in regulating business practices for many reasons, most notably those associated with the potential for market failures, such as safety, equity, and other considerations. For instance, a key reason why government regulation is desirable is that producers do not bear all the costs of their actions, so that less is produced that is socially optimal. For example, with no safety regulations, all companies may gain a competitive advantage by skimping on safety, even though society as a whole may undergo an increase in workplace accidents. Companies might then tend to produce less than the optimal social outcome because they do not take into account all negative effects associated with increased production. The problems of overuse or waste are also possible in environmental contexts. Conversely, when the competitive markets produce an excessively small output, such as in pollution, exclusive production agreements are another form of collusion that can eliminate or mitigate the problem.

3. Tools of Government Intervention in the Economy

A second internal distortion is due to the fact that changes in capital stock, changes in the stock of technology embodied in capital, affect both the size of the real output and its composition. The reliance on the tax instrument results from cost, incentive considerations, and revenue raising requirements. All taxes increase the cost of intending to earn extra income. In a market for an intermediate product, the fixed factor is avoided as a result of the fact that a higher level of output cannot be produced without raising the price of the services of the fixed factor. This follows. In those markets where rigidities occur in the ability of prices to reflect changes in costs, then factor price changes must become a burden on particular factors. The tax is an added cost that arises when the redistribution implies to resources that are not taxed.

The government also has at its disposal a whole range of economic policy instruments. The premise assumption in this theoretical effort is that the interest is in equilibrium solutions. We shall primarily deal with distortions brought on by fiscal intervention in response to marked failure. There are therefore two strands of economic policy that can be pursued to maintain or restore full employment and price stability. In general, we have to deal with many markets, goods markets in which patterns of production and consumption decisions are interrelated; and factors’ markets in which the pricing and allocation of resources are decided. However, the level of activity in each market, the levels of production and consumption, and relative factors supply also goods materials, affect each of the markets in turn.

4. Public Goods and Externalities

The classic treatment of such situations is the provision of public goods. National defense provides a simple example. If a government provides national defense through taxation, some citizens will probably find the benefit worth less than it costs, compared to other citizens who are more outstanding consumers of defense, such as a country’s largest cities, the largest firms, and rich people. The sums earned through taxation, some citizens will probably find the benefit worth less than it costs, leading to the free-rider problem. If no one else is contributing to the public protection, by using the public road the driver increases the person’s benefit greater than the private alternatives, only because no one else uses the road. This leaves individuals worse off—hence the public protection requires government provision. Similar issues arise in dealing with negative spillovers. Policing activities supply a useful example. When people inadvertently cause trouble (like crashes) imposing costs on others, it makes sense for the government to intervene.

Through the tax system, governments raise revenue that is used for public purposes, such as building schools, financing a war, or transferring income to people in need. The government also uses its power to force people to do things and impose restrictions on behavior, such as stopping at a red light. Unfortunately, such rule-making can inadvertently force individuals into harmful situations. By limiting liability for unintentional harm from a failed attempt to avoid a red light, the government reduces the welfare losses from the forced stops, since the crashes still occur. And by watching the road, passing individuals become active participants in avoiding the crashes. Such well-intended government restrictions can sometimes leave people worse off than if the government had simply maintained laissez-faire.

5. Evaluating the Effectiveness of Government Policies

Evaluation itself can have both positive and normative consequences because agents designing, selecting, and benefiting from the policy being evaluated may expect or receive higher utility or income if an evaluative study should find the policy effective. Sometimes agents are able to manipulate their exogenous characteristics or the policy environment to favorable ends (selection bias). On these grounds, some believe that in certain circumstances it is better not to conduct an evaluative study. We believe these issues underscore the need for a rich, structural, and multi-disciplinary approach. In the interim, the more that is done along these lines of policy evaluation, the better (but not sufficient) the outcome for society.

This paper is directed to those with an interest in conducting evaluations and, equally important, those who are consumers of the results of such studies. As researchers, it is less important to know the details of various methods than to have an appreciation of their limitations.

Vibrant public debate is fundamental to democracy, and public policies are fundamental to the public welfare. Policymakers benefit from understanding how individuals actually respond to policy measures. Are there identifiable benefits to evaluating government policies? The answer is clearly “yes.” Why consider evaluation if the process of selecting and implementing policies is flawless? Evaluation is decisive in arriving at these answers, as well as in undoing it if the policy is clearly harmful.

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