Learning Economics: Five Government Roles Promoting an Efficient Economy

The government plays a vital role in promoting an efficient economy. Without intervention at times, the economy as a whole would suffer, causing harm to citizens of the country. Five major roles that the government plays includes protecting personal rights, subsidizing certain goods, putting corrective taxes on certain goods, providing certain public goods, and making sure that public resources are not over utilized. These are very important things, as without them, the economy would not function properly.

One of the most important roles that the government plays in an economy is protecting personal property, individual rights, and enforcing contracts. If this was not done, then there would be no ownership of anything, causing the economy to fail. Therefore, it is very important that the government protects these rights.

Another role that the government plays in efficient economies is subsidizing goods that results in a positive externality. A positive externality is a positive impact of a person's actions on bystanders. For example, one thing that the government help subsidize is education. Educated people are better able to help others, so education causes a positive externality.

On that same thought, the government also plays another role in efficient economies by placing corrective taxes on goods they cause a negative externality. A negative externality is the opposite of a positive externality, meaning that it harms bystanders as a result of actions by a person. For example, the government places corrective taxes on items such as cigarettes to help set the equilibrium market.

Another rule that the government is responsible for in an efficient economy is to provide public goods. An example of this is the road systems. The government is responsible for creating and maintaining public roads. This ensures that everybody is allowed to use the roads built by the government.

Finally, another important role that the government plays in promoting efficient economy is making sure that common resources are not overused. For example, the government regulates certain industries like fishing so that companies and people do not over fish the population. Making sure that common resources are not overused is a very important task, as they would be quickly used up without proper regulation.

Source:

Jameson, George. Lecture: Economics. December 2, 2009