Market failure_ government failure and government intervention - DOC

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					Market failure, government failure and government intervention
Writing Time :2008-06-21 01:44
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In the modern market economy, market regulation and government intervention, free
competition and macro-control, is closely related and intertwined, an important and
indispensable part. Because the full effectiveness of the market mechanism only in
strict conditions only under the hypothesis, but also government intervention only
with the perfect "ideal government" link. In other words, market
regulation and government intervention are not omnipotent, has inherent defects and
failures, the failure of the objective may be, the key is to seek economic and social
development of market mechanisms and the best combination of government
regulation, making government intervention in the remedy and correcting market
failures, while up to avoid and overcome government failure, which
China's socialist market economy system and improve, no doubt of great
theoretical and practical significance.
First, market failure the government's active intervention as necessary
Western developed countries and a number of late-modern market economy countries,
the actual history and track the evolution of government functions that the market
regulator this "invisible hand" has its energy, but also it can not.
On the one hand, the market economy is the human activity so far the most efficient
and economic operation mechanism and the allocation of resources means that it has
any other mechanisms and means irreplaceable functional advantage: ~ is the
economic interests of the irritant. The interests of market players and free competition
drive the formation of ~ kind of strong power, it is a great mobilization of
people's initiative and creativity, promote the production technology,
production organization and product mix of constant innovation, high efficiency of
resource allocation. Second, market flexibility in decision making. In a market
economy, producers and consumers as the main micro-economic structure of the
decentralized decision-making, changes in supply and demand timely and effective
response to a flexible, quickly balance supply and demand, reducing wastage of
resources, improve the efficiency of decision-making. Third, the effectiveness of
market information. Efficient allocation of resources required to fully use all the
information economy. Substituting the price system as the main content of
information architecture can make a Jingjihuodong each participant was simple, Ming
Xi, efficient information and full and effective to use and thus help to improve
resource allocation is reasonable. In addition, the healthy functioning of market
economy also help prevent and reduce the direct administrative control of the
inefficiency and corruption. On the other hand, the market economy has its limitations,
the functional defects are inherent in the market itself is difficult to overcome alone,
completely rejected government intervention to market regulation will be greater than
the advantage of defects, leading to "market failure" (market
failure), which requires the help of superior market power over - the government only
the "visible hand" to correct market failures make up.
(-) Market can not maintain the overall balance and stability of the national economy
and the development of coordinated
Market regulation to achieve economic equilibrium is an ex post regulation and
decentralized decision-making through the completion of the balance, it often has a
considerable degree of spontaneity and blindness, resulting cyclical economic
fluctuations and supply and demand imbalance. In food production, livestock
breeding sectors long production cycle will occur typical "cobweb
fluctuations." In addition, the market economy, individual rational choice
in individual industries, individual can effectively regulate the market supply and
demand, but the individual rational choice of the Syndicated news 效果 might lead
to collective irrational behavior, such as inflation occurs when the economy
O'clock, as rational person would naturally make rational choices - to
increase spending to buy goods, and each person's rational choice is the
collective effect arising from the irrational election - to maintain and even aggravate
inflation; Similarly, the recession, it will also result rational choice of each individual
- to reduce spending and lead to collective irrational behavior - to maintain and even
exacerbate depression. Furthermore, market players in the competition, in order to
maximize profits, often to fund investment period is short, fast convergence, low risk
industries, led to irrational industrial structure. This requires that the Government use
the program, use of fiscal, monetary, credit, exchange rates, preferential policies and
measures such as sanctions. Economic levers and legal means, in particular, to
"discretion" of the country's macroeconomic policy,
a timely change of variables and parameters of operation of the market in order to
reduce economic volatility and the frequency at the same time through the
formulation of development strategies, development plans and industrial policies, a
number of important area of investment to guide the rational distribution of
productive forces, optimizing industrial structure, to maintain macroeconomic
stability and overall economic balance.
(B) laissez-faire market competition would ultimately go their opposite - monopoly
Because the production costs determine the market price of the marginal production
costs to make Shichangzhuti 在 level of competition in our market Butong position,
and then some Chuyuyouli Xing Shi Dao Zhi's enterprise Zhu Jian
dominant. In order to obtain economies of scale at the same time, some market
players, often through joint, combined, the means of merger, forming a monopoly on
the market, leading to distortion of competition on the market. It can not play a
spontaneous and effective regulation and control functions, under the conditions of
perfect competition, "Pareto optimal" (Pareto Optimum) is to
optimize the allocation of resources, has become a purely hypothetical, it is
considered monopolistic market economy " Achilles problems. "
This requires that government act as a public person, the main competition in the
market to be the appropriate guidance, constraints, such as the development of
anti-trust or anti-trust laws, price controls, monopoly control of the degree. Western
developed countries in this regard the lessons learned over the centuries there for us to
learn. This is not a sound market order, the transition in the economic system also
comes with some traces of administrative monopoly in China, the Government is to
promote market development and the establishment of procedures for fair market
competition has a more important responsibility. This outstanding performance should
be based on institutional innovation in the government, establish and improve the
system of norms of fair competition and policy framework, increase enacted national
anti-monopoly law (recent Beijing and Shanghai, have successively developed a
group of local anti-monopoly regulations) and has been in force, "The
People's Republic of China Against Unfair Competition Law"
matched, to prevent possible and to prevent various forms has occurred a monopoly.
(C) the market mechanism can not compensate and correct the external effects of
The so-called external effects (exter nality), according to economists Berg, Fisher and
others view, is "making a single production or consumption decisions
directly affect the production or consumption of others, the process is not through the
market" . In other words, the external effect is independent of the objective
existence outside the market mechanism, it can not automatically weaken or eliminate
the market mechanism, often require the help of outside forces of the market
mechanism to be correct and up. Clearly, the market economy means that some of the
main external effects can be obtained free of charge to the external economy
(external-economies), and some parties do not suffer the external economy (external
diseconmies) losses have been compensated. The former is common in economic life
"free rider" (freeride), ie the consumption of public education,
public infrastructure, national defense construction and other public products (public
goods) instead of sharing the cost, which would be in the vicinity, such as industrial
emissions of pollutants resident or business losses, predatory natural resources and
environment open to serious damage, and smoking and so commonplace everywhere.
Such external effects and free riders can not normally shown by the market price, of
course, will not be able to exchange the way through the market to be corrected. By
ideological beliefs and moral teaching is to make it weakened, but the effect is limited.
Only through the state's tax or subsidy policies or administrative controls
such as specific discharge standards and pollution fee collection, and no smoking in
public places, such as rules to internalize external effects to minimize the process of
economic development and the external effects of market-based , protection of natural
resources and ecological environment.
(D) inability to organize and market mechanisms to achieve the supply of public
The so-called public goods are those that can be simultaneously shared by many
people enjoy the products and services, and supply of its cost and enjoy its effects, not
the number of lorry with its scale of change, such as public facilities, environmental
protection, cultural and scientific education, medicine and health. Foreign affairs,
national defense. Because public goods consumption is non-exclusive and
non-confrontational characteristics of a person of public goods consumption will not
result in the product Jianshao others, so Zhi Yao You 存在 public goods, we can all
consumption. This is certainly the one hand, the supply of public goods necessary
costs, such costs should be shared by the beneficiaries, but on the other hand,
"once it has been produced, making producers who can not get
it", that is, the supply of public goods through the formation of a , we can
not exclude the consumer does not pay for, so inevitably will have noted earlier in the
economy, the living and the resulting emergence of "free riders."
More serious is. Since, then, everyone would like someone to provide public goods,
and reap the profits themselves, the result is very likely that no one provision of
public goods. The lack of the necessary public goods, the objective socio-economic
needs can not greatly reduce the efficiency of the allocation of social resources. This
requires the government to community organizations and as managers realize the
supply of public goods, and regulate their use.
(E) market allocation mechanism will result in unfair distribution of income and
wealth polarization
General. Market can promote economic efficiency and productivity. But can not
automatically bring about social distribution structure of balanced and fair. Pursue
exchange of equal value, the principle of fair competition, the market allocation
mechanism are as various localities and sectors (industry), the uneven development,
and each unit of natural endowments, education quality and for the community at first
the different conditions, resulting in its differences in income levels, resulting in
inequality in fact learning, while the rules of competition are often the strong stronger
and the weak weaker, more and more concentration of wealth, "Matthew
effect", resulting in income between rich and poor, developed and
backward areas the growing gap between. In addition, the market regulation itself can
not guarantee full employment, and unemployment is exacerbated by the disparity of
wealth, which sustained economic growth is great out of the Society: a few wealthy
people control the economy; the potential outflow of capital; many of the poor lead to
social total consumption, so that it is difficult to market development and so on.
Worse, over the rich-poor divide "not only weaken the cohesion of society,
and culture of the injustice, which inevitably undermines the maintenance of social
and political ties. ... ... And then people may be asked to place intense political, social
and economic changes. " Economically backward, a number of ethnic
minority and low-income areas may also result in the intensification of ethnic
(Vi) market can not self-defined market borders and interests of the subject property
boundary, to achieve economic order
Activity in the market economy, individuals and enterprises of all market players and
purpose of economic behavior means the realization of course, subject to market
variables (raw material costs, prices, available in the labor force, supply and demand
status, etc.) dominated, and These variables The specific rule (that is an inherent
requirement of the market economy and the market operation rules spontaneously,
that Adam Smith's "invisible hand", it will by the
main body of independent, free choice, equality and mutual benefit and a series of
demonstrated by market principles.) adjusts their behavior to achieve a certain degree
of spontaneous economic order; but as a person to seek economic self-interest
maximization has always been the main target of the market at the close, 广泛,
complex and detailed economic ties to compete, conflicts of interest and conflicts are
inevitable, but whether the parties themselves and market their own property
boundaries with the main division of the market mechanism and the interests of the
boundaries, but do not have the ability to resolve conflict. This requires the backing of
social public power of government to act as arbitrator, setting reflect and protect the
market principles "game plan" that is in the form of clear
policies or laws defining and protecting property rights the rights of different
stakeholders, to ensure market efficiency and fairness of the transaction. Further to
say that the brutality of market competition, survival of the fittest are likely to cause
people to take risks, resulting in illegal criminal acts of infringement of rights of
others, disrupt the social and economic order. In this regard, market players are unable
to. Only the government backed the use of state violence to prevent and combat
criminal activities in the economic field, such as by accreditation, licensing and other
administrative systems to prevent the occurrence of economic crimes, and strictly
investigate and punish criminal acts of economic, market mechanisms to ensure that
the basic order of and the market for the legal rights and interests. In addition, in the
development of appropriate foreign policy conducive to economic development for
the peaceful international environment to develop their commodities markets and
attract foreign investment and protect their overall and long-term economic interests,
among others, the Government undoubtedly Ye have the market but is unable to for
the healthy functioning of modern market economy must function.
The market regulation defects and failure mechanisms for government intervention in
economic activities to make way, because of this, the government's
macroeconomic regulation and control, has become a modern market economic
system, an integral part. As the famous economist, Nobel laureate Paul Samuelson has
said; "Today nothing can replace the market to organize a large and
complex economy. The problem is that the market has neither the heart nor the mind,
it does not conscience would not think there is no scruples. so. to pass the government
policy to correct some deficiencies by the market economy brought about. "
Therefore, "the modern economy is the market and government revenue,
expenditure and regulation of the visible hands of the mixture."
?Second, government failure and decided to appropriate government intervention,
?Market failure to provide the fundamental basis for government intervention, but
government intervention is also non-universal, as there is a "government
failure" (government failure) the possibility of the government with
Lindblom's words, 'knowledge there are thick thumb, without
the other fingers. "government failure on the one hand the performance of
the government's ineffective intervention, that is, the scope of government
macro-control mode selection and intensity of inadequate or improper, can not
compensate for" market failure "to maintain the normal
operation of the market mechanism is reasonably necessary. such as the ecological
inadequate protection of the environment. the lack of protection of fair competition
laws, regulations and measures, infrastructure, public Chan Pin-investment, policy
Gongju choose Shang misconduct, Bu Neng Zhengqueyunyong administrative
command means, the results also can not make up He Jiuzheng market failure; Ling
On the one hand, the performance of the government's excessive
intervention, that the scope and intensity of government intervention, more than
compensate for "market failure" and maintain the operation of
market mechanisms work reasonably necessary, or intervention in the wrong direction
the road to select misconduct, Biru Bu Heli restrictive rules and regulations too much
too small, the proportion of the production of public goods is too large, too ahead of
public facilities; on various policy options and instruments with inappropriate,
excessive use of administrative means to intervene in the market within the command
to run the order, the result not only can not to correct market failures, but inhibited the
normal operation of the market mechanism.
Why, then, government intervention will fail to do? Or that led to the failure of the
(A) the fairness of government intervention is not necessary. Government intervention
is that it should be a prerequisite for social and public interests as the embodiment of
the operation of the market for a fair and impartial regulation, public choice theory of
government officials, as Adam Smith called "economic man"
assumption, of course, any errors of biases, but in reality the government does not
always so noble, self-interest rather than government agencies to seek public interest
within the so-called "internal effect" (interalities) phenomenon
in the capitalist countries, "money" in politics has maxed
performance. In socialist countries, the same can not be completely ruled out in theory,
government agencies, "the inherent effect of" possibility, in
practice, few government officials of corruption also occur. This pursuit of
self-interest government "internal effect" must greatly affect the
Government's intervention under the optimal allocation of resources, as the
external effect as a cause of market failure as "internal effect" is
an important source of municipal failure.
(B) low efficiency of some intervention. And market mechanisms, the government
intervention is not the first to direct the public for the purpose of profit. Zheng Fu to
compensate for market failure and direct intervention in the field often yes those big
investment, Shouyi slow and less of public products, Qi Gong Ji Fei Jia Ge as a
general feature is that government can not clear the price of Jiaohuan there directly
from the charge supply Duixiang , but mainly rely on fiscal spending to maintain their
production and management, it is difficult regardless of the cost, so the lack of cost
efficiency in the direct interests of the drive.
Second, government intervention also has a monopoly. Government is in
"some much-needed public goods (such as national defense, police, fire,
roads) the status of the monopoly provider," determines only the
government can own the market from outside interference or control the overall
running of the functions and powers . This is not competition, monopoly easily lost on
the government efficiency, effectiveness pursuit. Finally, government intervention
also needs to have a high degree of coordination. Government regulation of the
organized system is implemented by the government composed of numerous agencies
or departments, the powers of these bodies inter-division coordination, sector
Guandian, all affect the control system of Yunzhuanxiaoshuai Zhao.
(C) easily lead to government intervention in the expansion of the size of government.
The government should take on the functions of market intervention in economic
activities, including the organization of the supply of public goods, the maintenance
of social and economic order, etc., the natural need to fulfill this function the
appropriate agencies and personnel. Adolf Wagner Berlin University proposed in the
19th century: the government in its very nature, have a natural tendency to expand,
particularly its intervention in economic activities of the public sector in number and
importance has a built-in widening, it is the Western economic circles as
"Wagner's law of increasing public activity." This
inner expansion of the government and the community to the growing demand for
public goods more corresponds, easily led to the expansion and strengthening the
functions of government intervention and its institutions and personnel growth,
thereby increasing the budget caused by the size and financial deficit, the high cost of
government intervention.
(D) government intervention for the rent-seeking behavior was offered the possibility.
Rent-seeking individuals or groups to fight for their own economic interests of the
government or government influence to help their fight for a redistribution of
unproductive activities (ie, no additional social wealth and welfare), such as enterprise
through legal particular form of illegal ex-gratia to the Government for concessions,
by seeking government intervention on the existing policy changes or other
concessions from the Government for political asylum, a market monopoly use of
scarce supplies. In this case, government officials in power is very likely
"be illegal to provide money or other compensation to lure, to make
beneficial owners has paid damages to provide the public and the public interest
act." Shows that rent-seeking possible because of government intervention
(government intervention known as the "rent the womb") is
invariably a result of excessive intervention and lack of such norms and oversight a
reality. The main hazard is that "not only improve the economic efficiency
of production operators to the momentum disappeared, but also easily cause the entire
economy in the resources consumed by rent-seeking activities and corruption and the
sectarian activities by increasing transaction costs in the economy." To
government intervention in the failure of an important source.
(E) government failure is also often due to government decision-making errors.
Government intervention in economic activities, is actually a ground cover, complex
decision-making process (or in public policy formulation and implementation
process). Correct decisions must be based on adequate and reliable information.
However, this information is scattered in many individual actors, and transfer between
the Government difficult to fully occupied, plus the activities of modern social market
economy, the complexity and variability, increased government control of information
and analysis of comprehensive treatment difficult. This situation can easily lead to
mistakes in government policy and the operation of the market economy is bound to
have irreversible negative effects. The right decision makers also need to have a very
high quality. Government macro-control, must be based on market operations of
accurate judgments, the development control policies, to take the necessary measures,
which in practice is quite difficult. Even if the judge accurately, and with the
appropriate policy instrument choice, the intensity is also difficult to determine in
advance. The lack of and intervention in pre-over, will result in
"government failure." But in reality, many government officials
do not have the quality and capacity of the decision, which will inevitably affect the
efficiency and effectiveness in advance.
Because of the existence of government intervention in the defect, so an alternative to
government intervention as the leading force in the market, which could only lead to
"government          failure",      with      "government
failure" to intervene "out of the market" must be
defeated by adding failure to further failure of market failure. However, the existence
of market failure objective need for the Government's active intervention,
"Night Watch" like "passive" market
failure the government also does not help, it will also result in government failure.
Therefore, the government does not interfere or intervene in excessive fatigue and the
Government in advance of the column were discarded. Realistic and reasonable
relationship between government and the market should be in ensuring that the market
plays a fundamental role in the allocation of resources under the premise of the
government's intervention to make up for market regulation of the short
length, the head of market regulation the same time have to overcome the government
intervention short, in order to achieve market regulation and government intervention
no mechanism for the optimal combination of two, namely, the respected economist,
the "convex combination." To this end, we need the government
to maximize the elimination of lead from the root of government failure to start, both
against the government failure to take effective measures (such as identifying with
Chinese characteristics, the economic functions of government Shuangxiang the
general concept of remodeling; from rationalizing government interests of justice to
guarantee that government intervention, detached; norms and behavior of the
functions of the Government in advance; to strengthen the supervision and conduct of
government regulation; improve the scientific level of government decision-making;
the bow team competition in certain areas of government regulation, etc.), in to
overcome and correct market failures, it must also complement the Government to
prevent and correct failures.