The Good and Bad about Markets and Government Interventions

When the different ways of how modern economies and societies choose the combination of goods and services that are going to be produced are decided on, it is important to understand that the everyday laws and economic institutions are the result of found economic pressure, be it to allow the markets to act on their own in the conversion of resources in product or to use the power of the government to intervene in the markets with the purpose of obtaining different results.

By considering the controversy of allowing the markets to act on their own or to intervene, there are a few factors that need to be kept in mind, which are:

  • Modern economies are very complicated and literally produce millions of goods and services with limited amounts of land, work and capital. The markets manage this complex aspect very easily, but in general this is not the case with the government interventions, and this frequently means that the government interventions run the risk of having considerable reductions both in the productive and distribution efficiency.
  • There are some goods that cause negative effects such as electrical centrals due the fact of the all the carbon that is burned and these have negative effects. These negative effects promote government intervention in the economy, because if they are left alone, these markets produce a great amount of these goods and services.
  • Some people end up consuming a very high amount of goods and services that are produced, while there are others that do not end up with much. This unequal distribution also causes a lot pressure in favor of intervention from the government in the economy, with the sole purpose of leveling the levels of life.

These points are both a consequence as a cause of the fact that our modern economies are, in great part, a combination of the market production and the intervention of the government. In general, what is produced, how much is produced and who receives it is decided through voluntary transactions between the individuals and the businesses. But sometimes the government uses their power of force to obtain results that would not be caused if the individuals and businesses acted on their own.

In both cases, the laws and traditions that govern the economical transactions helps society to produce a combination of products that are efficient both production wise as well as in distribution.