Sunday, June 12, 2011

Why Government Intervention Necessary (From the point of view of Public Administration)

Primarily, Government has to intervene when market is inefficient and not competent. Generally when market is failure, direct government interventions are necessary. Otherwise, government should promote the public welfare and work to facilitate the market. But in reality, intervention by the government is felt due to the following reasons:-
  1. Provision of Public Good: Public goods are those goods and services whose availability of one person does not affect to the availability to another. Each and every person in can use these services without respect of rich or poor, powerful or weaker. Such goods and service can't be provide by the private sector, due to its high cost or high risk or low return but these services are necessary for the daily life of the people. So, governed intervention is necessary. Such provisions include, road, means of transportation, drinking water, sanitation, electricity, education, health etc. Private sector is always profit oriented, so government is the only entity responsible to manages these activities ensuring easy accessibility of such public goods. Hence, in this point, government's intervention is required. 
  2. Control Natural Monopoly:- Government is the only entity authorized to use natural resources for producing public goods and service. Marginal cost of new product unit (of road, electricity etc), goes on decreasing., But if the responsibility of such function is given to private sector, there is always chance to create natural monopoly. They can set the prise of each unit not based upon the marginal cost but on average price. So, to control the natural monopoly, government intervention is necessary. 
  3. Externalities:-  Externalities occur when due to benefit of one party or person, another party or person may be affected. For example, when rich people use cars poor people are affected by its smoke without using car. Similarly in brick industry, cement industry or in any other area such externalities may arise. Hence, to regulate those externalities and to compensate the affected people, state interventions are necessary.
  4. Markets' Imperfect Competition:- Private sector go for the aggressive promotional activities but that may lack sustainability. Imperfect competition in the market due to the influence of some people may create profit for short term and may hinder the benefit of general people as a whole. To remove such practices and to increase competition in the market government has to intervene. 
  5. Equality and Equity:- All the citizens are liable to receive public goods and service equally, but in reality poor and weaker section are excluded from market. Government has to secure their place in the market by providing subsidies, etc. Government interventions are justified that it should make provision of state services to all the section of the society.
  6. Accountability:- It is necessary to fix that who is accountable to make provision  of essential goods and service to the people. If the responsibility is left to the market, as stated above, weaker section is excluded. So the government is the only responsible to take accountability to make provision of such goods and services to the people.
These are the only few reasons of causes of government intervention. There are many factors which demand the government intervention.

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