How Much Should Government
Intervene?
Do governments intervene too little, or too much, in response to market
failure? This question reflects one aspect of the continuing debate over
the role of government in the economy. Although many economists
might agree on the principles that should guide government intervention
in selected cases, there is more disagreement about the broader role of
government in the economy. Unfortunately, the issue is often framed
ideologically. Those on the “right wing” tend to compare heavy-handed
government with a hypothetical and perfectly operating competitive
market. In contrast, those on the “left wing” tend to compare hypothetical
and ideal government intervention with a laissez-faire economy rife with
market failures. Both perspectives are in danger of missing the more
relevant debate.
Evaluating the costs and benefits of government intervention requires a comparison of the
private economic system as it actually works with the pattern of government intervention as it
actually performs.Over the last three decades in most of the advanced industrial countries,
the mix of free-market determination and government ownership and
regulation has been shifting toward more market determination. No
reasonable person believes that government intervention can, or should,
be reduced to zero. Do we still have a long way to go in reversing the tide