The Reasons Of A Government Successure And Government Failure

The Framers of the United States Constitution ultimately decided to give more power to the Federal government rather than the state governments for many reasons. There were many problems with the articles that caused instability in the government, and even a rebellion. Then there’s the Federal government who lacked powers to do anything much because the people were too scared to make the Federal government strong. Lastly, there was the State government who had either too much power or they had power that the Federal government should have. There were a lot of problems with the Articles that needed to be addressed , most of which were addressed.

In America’s pre-revolutionary days, the American people were oppressed by King George III and his unfair policies. After winning independence from Great Britain, America’s leaders decided that a weak central government provided by the Articles of Confederation would solve their former issues with tyrannical powers. However, the Articles failed after only a few years and the new country was in need of a strong central government and a leader, which the Constitution provided. The framers of the Constitution created an executive branch because America was in need for a leader due to the failure of the Articles of Confederation to provide a strong central government. The three branches of government were created in order to evenly distribute power to avoid tyrannical rule. The president was given the power to issue executive orders, however, the president’s powers was limited by a series of check and balances made by Congress and the judicial branch to avoid to rise of a tyrannical leader like King George III.

One of the biggest problems with some sort of a government is that they tend to spend the money on things that would not benefit their country. As in the Gilded Age many people were incredibly poor or filthy rich. Many of the rich people were in the government such as the president. When this occurs it means that the government is hoarding the money of themselves and not helping the people. It’s the same thing today in America and especially other countries who starve their people.

Preface to the First Edition: Hazlitt states that there is always influence of fallacy in every major government. “There is not a major government in the world at this moment, however, whose economic policies are not influenced if they are not almost wholly determined by acceptance of some of these fallacies.” (Hazlitt 10) To better understand economics, it is necessary to study the fallacies that create governments. The purpose of Hazlitt’s book is to bring about the most common, and influential economic errors.

Public goods are one of the main types of market failures that the government often has the ability to solve. Public goods such as medical, education, and employments can be seen as market failures. An example of a public good would the post office. The government controls the majority of shipping and package delivery but also the ability to solve the problem of lost budgets annually and the increasing rates of shipping. The post office is a necessity and is failing based on the lost revenue every year. The post office is also losing its labor supply based on the loss income and profit. The government can allow for the post office to become publicly run where a profit can be made and allow for an oligopoly to keep prices low with removed competition. The government has the option of stepping out of the market and allowing it to grow within a free market system.

The government is spending too much time on helping their states and not looking out for the economy as a whole. The government is spending too much money on the environment and it is preventing construction and infrastructure to grow. The government has also added hundreds of regulations that have not helped business owners such as the federal tax codes, the affordable care act, overtime rules and much more. These examples of why the government is not looking out for the average American have initially slowed the economy down.

Government plays a crucial role in the market economy by ensuring the laws and regulation are abide by, and control the production of the private sectors, although, over the years its efforts in controlling such economies are minimal and insignificant. Market forces of demand and supply play a major role in setting trends that such market economies follow. Economic growth, inflation, interest rates, wage rates of workers and unemployment rates are some of the fields the government takes part in controlling, to boost the Gross National Product (GNP) of the state.

Throughout history, there have been many systems of government that have been created, and have revolutionised todays modern forms of government. Democracy, Monarchy, Dictatorship, Theocracy, and Anarchy all use various, unique techniques on how to run a civilization. Each of them require different leadership traits in order for it to work properly.

According to the economist, a government should improve market results by using its power to control harmful externalities.

1A. Market failure is a situation in which the allocation of goods and services is not efficient. In any given market, the quantity of a product demanded by consumers does not equate to the quantity supplied by suppliers. This is a direct result of a lack of certain economically ideal factors, which prevents equilibrium.

Businesses can decide which goods to produce and in what quantity and consumers can decide what they want to purchase and at what price. The role of the state is limited to ensure right precision in the prices charged by the sellers. Prices also have the function to allocate and distribute a country’s resources. Market leads to complete effectiveness bringing about the best possible distribution of a country’s resources in a perfect world. This would only happen in a state of equilibrium and there is a unique price for every commodity. But in a realistic world which is imperfect by nature, prices are never at equilibrium and very unstable depending upon the vagaries of the market forces. This generally harms people living below the poverty line. It is impossible for them to pay high prices in cases of demand shortage. Thus, the free market model is not a viable option in developing countries which has a large number of poor. Besides, producers are aim to minimize profit and maximize rent of production. Examples of countries that are using this economy system are Hong Kong, USA, and UK. Many developing countries like India and China are moving towards totally free-market economy.

Market failure is a situation where pure market forces such as the operation of the price mechanism fail to produce goods at a socially optimum level. In Australia’s mixed market economy, government intervenes to correct market failures. This can lead to environmental efficiency, productivity, additional revenue and employment however it can also reduce consumer welfare and cause government failure.

Having government involved in the economy has its pros and cons. One of the Pros is that the government can help prevent or discourage harmful behaviors or actions. Government regulation can prevent man-caused shortages. Fishing regulations are often put in place to prevent overfishing. These regulations prevent or discourage fishermen from fishing too much in one season, which allows the fish to repopulate and remain available in the future. In the book, Wheelan mentioned how the government can also tax bad behaviors to encourage behaviors that benefit health and/or the environment. An example of this is a tax on gasoline and/or larger vehicles, or a tax on cigarettes.

Why Nations Fail takes an in depth look into why some countries flourish and become rich powerful nations while other countries are left in or reduced to poverty. Throughout this book review I will discuss major arguments and theories used by the authors and how they directly impact international development, keeping in mind that nations are only as strong as their political and economical systems.

In a Systematic Country Diagnostic (SCD) conducted by the World Bank Group (WBG), it has been found that the government has been struggling to generate adequate revenue to be able to save or invest in welfare related projects like health, infrastructure, education, etc. Poor foreign policies affecting foreign investments, the low tax to GDP rate, excessive government control in all sectors and ambitious policies have all contributed to the weak and straggling economy.