18.4 Evaluating the Role of
Government LO 5
Government taxation and expenditure have a major effect on the
allocation of resources. The government determines how much of
society’s total output is devoted to education, healthcare, highways,
the armed forces, and so on.
When evaluating the overall role of government in the economy, we
should keep three basic issues in mind:
1. What is the appropriate mix between public goods and
private goods?
2. Much government activity is directed to providing goods and
services that add directly to the welfare of the private sector.
3. We should continually re-evaluate existing programs; some
that were needed in the past may no longer be needed; others
may have unintended and undesirable side effects.