What Justifies Public Intervention in the Economic Process of a Country.

There are so many justifications why Government should interval in the economic process of a country. Some of this reasons are depicted below,

1. It involves the determination of the distribution of tax burden in order to finance those goods and services they provide.

2. It also involves the manipulation of tax and expenditure in order to create high employment, reasonable price for goods and services, stability and to achieve acceptable rate of economic growth.

3. The provision but not necessarily the production of goods and services.

4. Macroeconomic intervention:  Intervention to overcome prolonged recessions and reduce unemployment.

5. Market failure: Markets fail to take into account externalities and are likely to under-produce public/merit goods. For example, governments can subsidize or provide goods with positive externalities.

6. Greater equality: Redistribute income and wealth to improve equality of opportunity and equality of outcome. In a free market, there tends to be inequality in income, wealth and opportunity. Private charity tends to be partial. Government intervention is necessary to redistribute income within society. In a free market, inequality can be created, not through ability and handwork, but privilege and monopoly power. Without government intervention, firms can exploitmonopoly power to pay low wages to workers and charge high prices to consumers. Without government intervention, we are liable to see the growth of monopoly power. Government intervention can regulate monopolies and promote competition. Therefore government intervention can promote greater equality of income, which is perceived as fairer.           

There are also some argument against government intervention in the economic process of a country which I will just briefly explain, which include;

i. Governments liable to make the wrong decisions, influenced by political pressure groups, they spend on inefficient projects which lead to an inefficient outcome.

ii.  Personal freedom, government intervention is taking away individuals decision on how to spend and act. Economic intervention takes some personal freedom away.

iii. The market is best at deciding how and when to produce.In conclusion,           

There is no society that run in the absence of government intervention. Even the most extreme libertarian economists would accept there needs to be some state protection of property rights and spending on national defense. The debate comes on the extent of government intervention. This needs to take place on each aspect of government intervention.