Free market economists argue that while markets sometimes fail to provide efficient outcomes, government intervention to correct these market failures often leads to a loss of economic welfare rather than a gain.
There are a number of reasons why government failure can occur:
• information failure – governments may take action on the basis of inaccurate or misleading information
• conflicting objectives – sometimes the appropriate government intervention is politically unpopular and is therefore ignored
• administration costs – sometimes the cost of administering a policy response is greater than the benefits gained
• market distortions – where intervention to correct a market failure leads to problems in other markets.
However, those who support government intervention argue that appropriate government intervention can reduce the inefficiency or inequality of the market system and can therefore lead to an improvement in economic welfare for all.
marlinbito answered the question on July 5, 2018 at 10:12
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