Should the government intervene with the market?

I don't think this has ever been discussed or debated on the forums yet and this section really needs some life to be honest. I want more conflict on the forums! *shot*

An economic system is an organized approach to producing and distributing goods and services. It is an organized way to answer the three economic questions of what, how and to whom to produce. Although every country must have an economic system to answer these three economic questions, their method of producing and distributing largely depends on the country's historical experience, form of government, objectives and ideologies. To some people, government intervention in the economy is considered necessary to protect against the worst elements of capitalism while others think that such regulations are an unnecessary invasions of their freedoms. To what extend do you believe the government should get involved in the economy?

I'm personally of the school that the government should be involved with the market because history has shown us that the market mechanism doesn't always produce the most optimal and efficient outcome and history has also shown us that leaving it alone to resolve itself hasn't worked out to our advantage as well. If I remember correctly, the US suffered about 5 depressions/recessions during its economic growth in the 19th century and early 20th century and the government almost did nothing. It was believed back then that it shouldn't be involved for the invisible hand would guide the market. Then the Great Depression happened and the government started to get much more invovled in the market and the US has experienced relatively fewer market failures and hasn't had anything similar to past depressions/recessions until quite recently.

There are also many market failures that I feel the market won't resolve such as the problem of asymmetric knowledge. Asymmetric knowledge is when either the supplier or buyer has more knowledge than the other and they exploit this superior knowledge. For example, a doctor or dentist could tell you that you need more treatment than you actually need just to create business and most people would trust them because they know the field better than them but unfortunately we'd be wasting money that could be put into other things. Usually this problem is more common with the buyer but it could happen with a supplier as well. Another problem that arises when the market is left alone is that certain products would never be made because there is no profit to be made off of them so supplying them would be a waste of money. Think of street lights for example. They're non-excludable and the product by nature can't have any competition. But who in their right mind would make a business out of it? Yet the product obviously benefits us by helping us from crashing into each other and keeping roads organized. So this is where the government steps in and supplies this good, using taxation to pay for it. There are other market failures but I want to keep this post relatively short. I might bring those up later.

So what do you guys think? Do you believe the government shouldn't interact with the market at all and leave it be? Should it have a light hand? Should it be heavily involved with the market? And for what reasons(ethical, practical, etc.)?

 

Some basic rundown on the econimc cycle, which is basically the state in which an economy is in over time. This shows kind of the basics of what governments try to deal with in the economy. We aim for an increase in growth of our economy since growth makes us more prosperious in money, and other benficial effects that affect our countries worth.

The economy of countries goes through 4 stages typically, the one you'll most recognise is recession, the others being slump, recovery and boom.
Here's a simple diagram on it:

Spoiler

The trend is basically the base aim an economy tries to meet over time since that's what the trend has shown to be from past experience. Growth is always constantly going upwards. The actual is the true representation of what happened in the economy. Growth is again going upwards like the trend shows, on average but barely ever sticks to it.

The majority of governments try to aim for the trend as much as possible, or at least that's their claim, so the cankeep sustainable growth, which means slowly but surely rising growth. As you can see, a boom period can be considered great since the growth is so high, but afterwards it always dramatically falls at some point and we enter a recession period, however we recover and get into a boom again. Obviously it's cyclical, why we call it the economic cycle.

Without Government input we would constantly and dramatically be shifting between the two, which is basically ****, in most economists opinions I believe, aince you can't predict and fully explot the exonomy or market potential for everyone. Sustainable growth allows more safety and assurance for an economy and its people, there by increasing their quality of life slowly but surely.

That's the basic reasons of why we have government involvement in the economy. Many more factors as to why they influence it, but for this topic specifically that's all you really need to understand. And i can't be bothered to explain more! XD


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On to my actual opinion....

No one economic is perfect, never will be perfect as far as I can tell. Too fluctuating and changing, the market is constantly shifting from the demand, supply, appreciation and depreciation of currency, politics, raw resources, employers, employees and so much more, none of which can completely and accurately be predicted or be analysed. At the very least not at this time.
So what i'm trying to say is that since these economic systems are definitely not perfect, intervantion from outside sources to influence desired and open results is welcome to me. It can more easily stabalise the fluctuations in the market.

Most economies claim to be Capitalist but honestly I don't know any pure capitalist governemnts existing in the world. I mean most all of them take forward policies that are protectionist, communist, heck you could even say fascist policies at times if your inclined. I dislike capitalism in its purity, that money is somehow a worth of the person in society, it reminds me of old European nobles who simply were given good clothes and houses purely because they were born into it, much like the heirs of fortunes of today are like. Few are worthy, they have no merit or worth but in some imaginary number floating around them that their parents gave them at birth.

I agree with lessening the wage gap, it's ancient and old to simply have poverty and super rich with the meandering middle having to deal with both extremes. However I do believe that your worth depends on your work, people do more work then they get more money and the opposite occurs as well, so different wage levels are fine but the extreme wages that are about is maddening.

Int the end, the government should involve itself when needed, it can be heavy or light but it can't be any one constantly and change with the times. It's a matter of discipline i find and moving with the right time of things. Government should know when and how. Growth needs to be sustainable, no one can be as easily judged and held accountable by the public then the government, so they are a necessity. Necessary evil or not is up to you.

 

As a socialist I do believe in government intervention in the economy. It comes with its share of difficulties, but I feel it is preferable to (today's) alternative--free market capitalism. American capitalism really isn't even true capitalism, as PaW says--in fact, I don't know of any country with a pure capitalistic system. The idea behind capitalism is driving the market by supply and demand, providing the consumer with the best possible product for the lowest price, and allowing the private businesses to succeed (or fail) on their own.

The American system has been warped by our cynicism and this idea of "rugged individualism." Our capitalistic system means money runs our world, someone is defined by their material success, and that there is a natural and necessary gap between have & have-nots, between the successful and the failures. In this I cannot agree. In addition, we have done exactly what Adam Smith advised against--allowed large corporations to control pricing and products. I think this, like communism, is just another example of something sounding good on paper, but not necessarily being good in implementation.

I do want to talk about the GDP, also. This is, frankly, a ridiculous way to measure the "success" of our country for many reasons but (in my opinion) the most important being it counts human suffering positively. To give an example: a hurricane hits the East Coast and causes death & destruction. The afflicted spend money to rebuild their homes & lives, employing contractors and giving business to hardware stores. For that reason, that death and destruction adds to our GDP. Another simpler example would be depression. This is part of a larger issue but these days doctors are prescribing quite a lot of anti-depressives or anti-anxiety medication. Many of these cases are people who genuinely suffer and I am happy they are getting their help; however, a significant number of these people are displaying these symptoms because of the climate they're living in (unemployment, a poor economy, Washington being unable to address citizen's needs, inequality). These people pay for their medication, giving money to pharmacies and drug companies, as well as paying their doctor for the visit. This adds to our GDP.

Those are some rather extreme examples. Robert Kennedy said it better than I could in 1968:

We've centered our society around this, and capitalism is partly to blame. I can't resign myself to that system. Ronald Reagan & his "Reaganonmics" operate well for a few years, but crash down later. This is a basic economic principle. The government needs to regulate and interfere with the market on a cyclic basis; they need to stick their hands in when necessary, keep them out when the situation calls for it. We need actual informed economists working on things, not party politics who ignore basic economic theory and principles.

Socialism has its short comings and I do not ignore them, but I feel they are preferable to what we have today. The business of the American government is not business; it is providing a service to its citizens, ensuring everyone has a happy, healthy, prosperous lifestyle. Money isn't everything, it is not success, yeah it'd be nice to live in a mansion but we have so much available in this country and in this world that even pulling the richest people a few notches down to bring the poorest so many notches up, I don't think that's a radical concept. But we can never have that in a capitalistic system, let alone our warped economic system.

Consider also our socialized institutions--public education, libraries, the post office--I don't know about you guys but I'm pretty fond of them. Why not create that on a greater scale? Capitalism has failed our country and has failed our people. We need to change it.

I could talk more about the benefits of socialism but I think I should stop now ololol

 

I'm of the school the government should only intervene when it's necessary.

As our government in the US has shown now that it has practically married itself to that of big business we have a shrinking middle class, little to no job creation, and a society that is barely making minnaum wage and living paycheck to paycheck as well as not knowing when their job will be outsourced by someone overseas who can do the same job for less.

Too much intervention and you have the US as it is now and too little will result in collapse. There needs to be a middle ground.

 

Although I do believe there needs to be an equilibrium I think your main problem right now is that, as you said it yourself, your government has practically married itself to big businesses. Money does pollute politics in my country too (hell, where doesn' t it ?) but not to such an extent.

 

As a conservative tea party member (expected hate)I must argue to say they should place regulations as in no monopolies. But I will say after that, let capitalism do what it does. No government intervention at all. Allow the economy to boom by doing it the way it was meant to be done. Now I do not disagree with communism either. I think full on government could work in theory. Nothing has proven to me that it actually is successful. Get some people who aren't mad with power working for the government and manage the economy, you cant, that is the point. Human nature is all about the individual self. So that is out of the bag. Socialism.... Has it worked? Let us go to the wonderful 2nd world country of China... nope. Anarchy? Being a firm believer in it, I would say it would work but then everyone argues that people want what the other person has and will take it by force if they cannot afford it via trade. Which leads to gun use and other violence. Once again, you need a perfect balance for it to work. So I will stick with the method that seems to work best which is capitalism. Very little to no government interference with the economy. Government do your jobs and the economists will do there's. As another point, did anyone here have a Government and Econ class or were they separate? Tend to be separate for good reason.

 

Because both classes explore the other one in them? Politics discusses the economy, Economics discuasses public sector, government intervantion in the market and so on. Having a single one is enough, putting both forward into a single class is in-depth and usually something explored at University level.

Also, you say the government should do their jobs and economists? That's the governmnets job, to govern. Laws are put in place, healthcare to attend and manage, create a free education system, organising the people into a single cohesive unit, offering job support and training, and all of this requires funding, money. Since these goods and services go to everyone in a sovereign state, taxes are put in place in order to make these things both affordable and/or free.

The government employs economists to reason the best public sector legislations possible. It's not as if they make random guesses, they make informed decisions and put it forward to politicians about the best possible outcome for the public.

Also economist bankers aren't exactly in high standing in recent years. The taxpayers had to save banks around the world when the government intervened, saving several bankes after making stupid decisions that are reckless. If the government hadn't been there to save the banks, our economies would've effectively stalled and crashed, and maybe we would've had anarchy, but that's after all the chaos and destruction. But the economy would effectively be dead. Economists are not flawless at their jobs.

The government is latched to the economy, any economist will tell you that. They are symbiotic at this point, and if ones was to go, so will the other.

 

I think that government should have a generally light hand on the overall economic system. They obviously can't come to any conclusions on what to do about it, United States anyway. They should just be there to moderate it enough so that the markets are even, and no one business is capitalizing the rest. It would be nice to say we can rely on the government to handle our economies, but that's like saying, "I'm going to trust my wallet with this gambling addict."

 

China is not an accurate example of socialism; they are a communist country (in theory at least, that could be argued). Communism is an extremist's form of socialism.

 

They say they are communist, but they really aren't. They do give some, very little, but some people owned businesses.

 

I honestly don't have a problem with conservatives and Tea Party members to be honest. They bring interesting points to the table. Many libertarians for example have made excellent arguments for why certain libertarian policies are the best options, and sometimes I agree with them. I think this kind of conservativism a valuable strain of political thought that deserves more attention, and I have no quarrel whatsoever with it and find myself leaning more and more in that direction myself in some situations. However, there's a more aggressive, very American strain of conservatism with which I do have a problem with. This is the kind which, rather than analyzing specific policies and often deciding a more laissez-faire approach is best, starts with the belief that government is evil and private industry is good and uses this faith in place of actually finding the best solution. If you're of that school of thought, then don't expect me to like you.

You see, I don't disagree with laissez-faire markets either to be honest. The theory is interesting and there are some points that I agree with. There are a few times when I think that some regulations are unncessary and can be done away with for example. But like yourself and communism, nothing has actually proven to me that full-on laissez-faire policies would benefit the majority of people and history has instead shown me how it can be a colossal failure if you're not on the top of the food chain.

China's not really an example of socialism though. Even then it's second only to the US in GDP and its economy is one of the fastest growing economies in the world so it's doing something right. And I find it odd that you site China to show that socialism doesn't work and then pretend that all of these 1st world countries in Europe that are very socialist don't even exist. Don't even get me started on the countries that make up Scandinavia.

I actually had a Civics & Economics class in high school. xD

 

This is true but the downstep from communism isn't socialism--in fact, they're not even a pure Marxist communism. Communism involves a complete government takeover of all political, social, religious, and economic sectors. Everyone is put on the same level, everything is redistributed equally. After time has passed and the system takes its roots, the government is meant to disband, while people continue in this lifestyle because they've realized it's better and more fulfilling to work for the good of everyone rather than just the good of themselves.

China, as far as I'm concerned, was never close to this. Maybe to the first stage, but certainly not the second.

Their current business model does have some socialistic aspects to it, you're right, and their control is akin to the first stage of communism. But they're very difficult to classify. As GS brings up, it's far more accurate to refer to the numerous European nations who have socialized aspects. The United States is the only modern, industrial nation without government provided health care--that's changing of course but this is simply the way the world is going. The government doesn't exist to make money or turn a profit, it exists to serve its citizens--which is can do, by funding through taxation.