Government Failure
Government failure is when government intervention causes a greater loss of welfare from correcting market failure
Causes of Gov.t Failure
Regulatory causes
Assymetric information
Unintended causes
Failure due to digilence
High enforcement costs
Policy lewads to greater inequality
Conlicts/Trade-offs with other aims
Banning smoking leading to higher demand for vapes
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Carbon tax
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The high costs and delays when implementing a policy
Policies that could lead to possible gov.t failure
Landfill tax
Rise in illegal fly-tipping of waste, leading to negative externalities.(unintended consequence)
UK gov.t offering a guarantee to protect all bank deposits to protect the UK financial system
Insuring against risk can lead to moral hazard
Gov.t introduces an import tariff on steel to protect jobs in domestic steel manufacturing firms
Raises costs for car and construction compaines
UK gov.t offers a £5000 grant for people swapping their gas boilers for low carbon heat pumps
Policy ineffectiveness and questions of fairness. Poor value of money -when a gov.t failure or market failure is causes by higher wastage or low productivity in actions, making the spending of the govt. failure less effective
Gov.t out sources the renovating of social (council) housing to private construction companies who must bid to win the contract
Competitive tendering may lead to asymmetric information, could lead to a compromise in quality for speed, companies may cut costs to save money and make profit, leading to low quality housing like the grenfell tower, cost-cutting risks safety of people