Government failure

Question 1

Government failure

Answer 1

Occurs when government intervention causes an inefficient allocation of resources. Basically they intervene to try and fix a problem but instead causes other issues

Question 2

Reasons for government failure

Answer 2

Lack of incentive
Poor information
No consistency

Question 3

Lack of incentives

Answer 3

Profit isn’t the aim of the public sector so there may be less incentive to improve services or cut costs, leading to inefficiencies.

Question 4

Poor information

Answer 4

Politicians may have poor information about type of service or not

Question 5

No consistency

Answer 5

Changes in government often leads to change of approach and new initiatives.

Question 6

How to overcome government failures

Answer 6

-Have performance targets or profit incentives
-Competitive tendering
-Employ private sector consultants to make decisions on how to cut costs

Question 7

Competitive tendering

Answer 7

Where public sector faces competition from private sectors for right to run a public service