Question

Write a brief paragraph detailing certain markets that wouldn't even exist without government intervention or government investment, and how this led to an increase in overall welfare for society. Please detail how these governmental actions created these markets.

Answer 1

The market economy advocates minimal government interference which creates a scenario where equilibrium price and quantity is determined by the market forces only. However, government for the sake of populism or in the name of protecting consumers or producers from extreme price variation, often interfere in the market. This creates a price distortion and dead weight loss for the society.

However, there is a type of market which exists only because of government. The weapons or defense equipment sector is one of such sector which exists only to cater orders from home country or foreign country. The missile system such S-500 of Russia is produced by the company owned by Russian government and Russian government uses it for own defense as well as sells it to others. The US, Israel and France also have such companies which are not owned by respective governments but they cater government requirements for defense.

The US has the largest budget for defense with almost $750 billion and many countries which don't have such expertise, import weapons and equipments. India and Saudi Arabia are one of the largest importers of such products. This creates a huge market which only exists because of government demand as there are no private buyers for radar equipments or surface-to-air missiles.

Although, this creates a military-industrial complex and government usually buys more than needed but as a matter of fact it creates welfare in the society. This increases the defense structure of the country and instills some sense of security. The residents feel secure and businesses also flourish in the safe and secure environment.
Further, such a huge demand can be generated by the government only and that means this government expenditure creates job and further chain of consumption in the economy.

It should be noted also that research and development for military requirement has created many products which are very useful in out daily life today. Internet is actually developed for the military which is a lifeline of our work life today.