In most of the countries, the government has intervened in the market system. To some extend there is a dire need of government intervention
in the market system, although there is a debate over the point among the economists.
Many economists believe that the role of government intervention improves the
scenario of the market system. The government can easily enforce the rules that
can help in smooth functioning of the market system. On the other hand, there
are economists who believe that government interventions in a market system are the reason of inefficiency in the system. Anyway,
the amount of government intervention needed in a market system is dependent on the state of a particular economy (Brodsky 1963).
BENEFITS OF GOVERNMENT INTERVENTION IN THE MARKET
The government intervention in the
market system has the following positive effects in the market (ilri.org2007 [online]):
- Improvement in the market structure:
one of the most important aspects of government intervention in the market system is the fact that it brings about an improvement in the market facilities, roads and other desired
infrastructure in the market.
- Improvement in the institutional infrastructures:
Goverment intervention plays an important in role in regulating the corruption and violence in the market system.
- Price control by government interventions: The government intervention in the market system avoids the excessive hike in prices by the market leaders.
DRAWBACKS OF GOVERNMENT INTERVENTION IN THE MARKET
Like every coin that has two faces, the government
intervention in the market system too has some draw backs in its end and here
are a few (wikipedia2007 [online]):
- The procedures of the government are
generally cumbersome. This leads to inefficiency in the market system. Most of
the time, the marketing boards waste a lot of time and money in holding unnecessary meetings and form reports that delay the
decisions in a market system to a great extent.
- The lack of incentives to the government
employees increases the inefficiency in the market system.
- Normally the low salaries provided
by the government to the members of the marketing boards leads to corruption in the market
- Great amount government intervention in the market system results in stopping the
transmission of information that is vital for the smooth operation of the market system.
- According to Milton Friedman, government intervention in the market system can result in increase
inflation, causing deflation, recessions as well as economic depressions.
Although the economists have a mixed view about the importance and effects of
government intervention in the market
system, it can be said that government interventions should aim at working
with the market system that is already existing rather than implementing policies
that make great changes (papers4you2007[online]). If the government intervention
is such that it introduces inefficiencies greater than rationalizing the entire market
system, there is a threat of damaging the economy. The distorted government intervention
can lead to consumer dissatisfaction and higher costs. Most of the economists are of the view that government interventions should be facilitating in nature rather than having a direct control over the market
The Distribution System of Mass Market by Ruth Lee Brodsky
Papers4you (2007). Available: www.papers4you.com.
Last accessed 24 October 2007.
Ilri.org (2007). Available: www.ilri.org. Last accessed 24 October 2007.
Wikipedia. (2007). Available: www.wikepedia.com.
Last accessed 25 October 2007.