Government Failures

The role of a government in the market economy is one of the most debated issues in economics. Similarly, one of the most enduring debates on U.S. economic history focuses on the role of government in the economy. Some argue that government regulation of the U.S. economy is too little and too late. On the other hand, there is also a claim that the U.S. economy is no longer a free market due to too many regulations.

Read the Last Word piece, “Government Failure” in the News, in Chapter 5 in your textbook. Investigate the use of special-interest lobbyists and its connection with the government failures. The process of lobbying legislatures is itself becoming a big business. State legislatures are under the same kind of pressure from interest groups as the Senate and the House of Representatives.

  • What are the roles of government in the market economy? Based the current economic conditions, to what extent should the government intervene in the market economy?
  • What are the justifications given in favor of more government involvement in the market economy? What are the reasons given in favor of less government involvement in the market economy?
  • Provide an example to discuss how special interests can succeed in perpetuating policies that are opposed by the majority of voters because the costs of organizing and motivating groups to take political action increase with group’s size.
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