Question

• Can government intervention in markets sometimes make the situation worse? Provide examples in your response. For example, consider the progress of the economy of Venezuela since 2000.

Answer 1

Failure of the government is a term for explaining how government interference will trigger its own problems. For instance , the government can take decisions that lead to an ineffective outcome for short-term political consideration. For example, a trade war, where the economy contracts, triggers government tariffs to defend domestic business. Lack of incentives. Individuals have a profit motive to innovate to lower prices in the free economy, but this motive is not there in the public sector. It may then contribute to inefficient manufacturing. State-owned enterprises, for instance, have also become inefficient, overstaffed, and manufacture products that consumers do not demand.

Less choice is also correlated with political interference in the economy (e.g. nationalisation of industries). Services generated by the government have a monopoly. Command economies, when the government dictated what to manufacture, also had very little options. Determination is an essential aspect of economic liberty and the right to optimise the wellbeing of people. (Not all political interference leads to less choice. The effects on personal freedom. Attempts to transform public conduct, such as decreasing pollution, promoting wellbeing by decreasing smoking rates and a healthy lifestyle, are a growing component of government interference. This involves taxation, behavioural factors and legislation. Often individuals can find like this is overbearing

Venezuela holds the biggest source of crude oil in the world — which once looked like an infinite cash gusher. The economy is running out of cash now, rates are soaring, and no one knows how much worse it's going to get.In the 1990s, Venezuela was a South American powerhouse. In 1997, former President Bill Clinton made it his first stop on a trip to the city.Yet inequality has become severe. While the overwhelmingly poor peasants were fuming, a small ruling class dominated it.