Goverment Intervention And Failure

Question 1

What is government failure

Answer 1

When intervention creates new or different market failures, or fails to deal with existing market failure

Question 2

Impacts of government intervention

Answer 2

Creates distortion in the market, as producers don’t know what the future holds necessarily
Incentivises black market
Excessive enforcement costs
Information gaps

Question 3

What can occur with government intervention into agriculture

Answer 3

Excess supply. eg overproduction of dairy and wine

Question 4

What is regulatory capture

Answer 4

A type of government failure where regulators don’t do their job because the firms they are sent to check up on get them on their side in order to not have to worry about regulation

Question 5

Root causes of government failure

Answer 5

Political self interest
Policy short termism
Regulatory capture
Harmful policy incentives
Information failures
Excessive regulation costs