Government Failure Flashcards
What is government failure ?
When the costs of intervention outweigh the benefits of intervention
What comes as a result of government failure ?
Worsening of the allocation of resources
Harming of social welfare
What are the 4 causes of GOVT failure ?
Info Failure
Admin + enforcement costs
Unintended consequences
Regulatory capture
How does info failure cause GOVT failure ?
People don’t value externalities as much , meaning people don’t correctly know how their actions impact society
How do admin + enforcement costs cause GOVT failure ?
Regulating behavior is time consuming and also expensive as you have to hire people the investigate and fine these culprits
How does regulatory capture cause
GOVT failure ?
GOVT’s may not correctly regulate monopolies and markets leading to consumer exploitation
How does unintended consequences cause GOVT failure ?
Black markets may be creates when Min + Max prices are used
Impacts on poor of price controls
Impacts on firms and employment
