Question

Discuss the key reason for the market failure in Sierra Leone in year 1980             

2.    According to McMillan (2002), discuss how the economy can maintain good market    

3.    As per the article discuss the consequences on corruption on Sierra Leone during 2017-18      

                                                                                                                             

      

4.    According to Cunningham (2011: 28-29), there are serious consequences for market failure by a nation, and particularly in a small and endowed country like Sierra Leone. Discuss 5 of those sconsequences that can arise due to market failure.                                         

5.    Discuss 5 recommendation as how the government of Sierra can overcome with market failure                                                                                                                    

6.    Why is it often suggested that imperfect information will result in a misallocation of resources? How can such a misallocation be avoided?                                          

7.    What is the another term of impact information as used in the Case of Sierra Leone?

                                                                                                                                

8.    Suppose in Sierra Leone, raising taxes or borrowing are your only two choices of financing current expenditures, which would you choose, and why, if you were in charge of setting policy?                                                                           

9.    We have learned from this course that the real value of the debt is eroded by inflation and may be overestimated because of it and other factors. Discuss whether you feel that the debt will be a major concern during your working lifetime and retirement why or why not?

Answer 1

Market failures arise due to market inefficiencies that distort price mechanism and distribution of goods and services among economic agents in the economy leading to welfare loss. The role of the government is to correct for the the disequilibrium and inefficiencies through policies that reduce deadweight loss. However, government policies that increase the deadweight loss can be destructive to the economic health of any nation. Correcting market failures through government policies that are burden on the fiscal health of an economy will tend to worsen the situation of the Nation and this is exactly what happened in Sierra Leone in 1980s. Early 1980;s in SIerra leone was marked by bad governance leading to poor allocative interventions by government and its agents that lead to higher inefficiencies. All market failures need not be corrected. The governancne in Sierra Leone is characterised to be corrupt and skewed and the struggle to stay in power led to generation of asymmteric information in the economy. the failure on government part was so deep that International Monetary Fund (IMF) declined its loan disembursement leading to further collapse of the economy. The situation in ISerra Leone has been anarchic which led to loss of confidence in capability and credibility of the government. The consequence of market failure was uncompetitive market, low level of equilibrium due to lower productivity, low level of investments in critical areas like research and innovation. Therefore, the reason for market failure in Sierra Leone in 1980s can be attributed to inefficient government policies and fiscal indiscipline by the corrupt government officials. It would have been better if government would not have interferred and allowed market to correct for the failure itself because the loss was much higher.