Market failure, government failure and government intervention Writing Time :2008-06-21 01:44 Original Address: http://dhui8008.blog.163.com/blog/static/31328382200852114454495/ ? 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 &quot;ideal government&quot; 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&#39;s socialist market economy system and improve, no doubt of great theoretical and practical significance. First, market failure the government&#39;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 &quot;invisible hand&quot; 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&#39;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 &quot;market failure&quot; (market failure), which requires the help of superior market power over - the government only the &quot;visible hand&quot; 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 &quot;cobweb fluctuations.&quot; 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&#39;clock, as rational person would naturally make rational choices - to increase spending to buy goods, and each person&#39;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 &quot;discretion&quot; of the country&#39;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&#39;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, &quot;Pareto optimal&quot; (Pareto Optimum) is to optimize the allocation of resources, has become a purely hypothetical, it is considered monopolistic market economy &quot; Achilles problems. &quot; 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, &quot;The People&#39;s Republic of China Against Unfair Competition Law&quot; 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 economic The so-called external effects (exter nality), according to economists Berg, Fisher and others view, is &quot;making a single production or consumption decisions directly affect the production or consumption of others, the process is not through the market&quot; . 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 &quot;free rider&quot; (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&#39;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 goods 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, &quot;once it has been produced, making producers who can not get it&quot;, 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 &quot;free riders.&quot; 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, &quot;Matthew effect&quot;, 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 &quot;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. &quot; Economically backward, a number of ethnic minority and low-income areas may also result in the intensification of ethnic conflicts. (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&#39;s &quot;invisible hand&quot;, 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 &quot;game plan&quot; 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&#39;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; &quot;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. &quot; Therefore, &quot;the modern economy is the market and government revenue, expenditure and regulation of the visible hands of the mixture.&quot; ?Second, government failure and decided to appropriate government intervention, effective ?Market failure to provide the fundamental basis for government intervention, but government intervention is also non-universal, as there is a &quot;government failure&quot; (government failure) the possibility of the government with Lindblom&#39;s words, &#39;knowledge there are thick thumb, without the other fingers. &quot;government failure on the one hand the performance of the government&#39;s ineffective intervention, that is, the scope of government macro-control mode selection and intensity of inadequate or improper, can not compensate for&quot; market failure &quot;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&#39;s excessive intervention, that the scope and intensity of government intervention, more than compensate for &quot;market failure&quot; 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 roots? (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 &quot;economic man&quot; 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 &quot;internal effect&quot; (interalities) phenomenon in the capitalist countries, &quot;money&quot; in politics has maxed performance. In socialist countries, the same can not be completely ruled out in theory, government agencies, &quot;the inherent effect of&quot; possibility, in practice, few government officials of corruption also occur. This pursuit of self-interest government &quot;internal effect&quot; must greatly affect the Government&#39;s intervention under the optimal allocation of resources, as the external effect as a cause of market failure as &quot;internal effect&quot; 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 &quot;some much-needed public goods (such as national defense, police, fire, roads) the status of the monopoly provider,&quot; 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 &quot;Wagner&#39;s law of increasing public activity.&quot; 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 &quot;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.&quot; Shows that rent-seeking possible because of government intervention (government intervention known as the &quot;rent the womb&quot;) is invariably a result of excessive intervention and lack of such norms and oversight a reality. The main hazard is that &quot;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.&quot; 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 &quot;government failure.&quot; 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 &quot;government failure&quot;, with &quot;government failure&quot; to intervene &quot;out of the market&quot; must be defeated by adding failure to further failure of market failure. However, the existence of market failure objective need for the Government&#39;s active intervention, &quot;Night Watch&quot; like &quot;passive&quot; 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&#39;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 &quot;convex combination.&quot; 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.