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Government intervention, Government budget constraints, entail incurring…
Government intervention
evaluation criteria
effectiveness
of measure
addressing root cause
assumptions for the measure to be effective holds (adequate information)
time required for measure to take effect
appropriateness
of measure
effectiveness of measure
Extent of trade-off with other economic activities
intended consequences
unintended consequences
Fiscal sustainability of measure (gov exp)
Non-economic consideration (public acceptability)
deciding between alternative projects
social
benefits
private benefits (accrue to users)
External benefits (accrue to third parties)
social
costs
private cost
construction, operating and maintenance cost
external cost
cost borne by third parties
deciding to intervene at all
cost of intervention
administrative
monitoring
implementation
gathering information on benefits
benefits of intervention
gain in welfare of society
considering significance of market failure
considering equity in distribution of output
Limitations of intervention
imperfect information
benefits from society's perspective
costs from society's perspective
government's will
motive of maximizing society's welfare
desire in pursuing
self-interest
Government
budget constraints
, entail incurring of opportunity cost