What Is the Proper Role of Government in a Market Economy

What is the proper role of government in a market economy? All people around the world make a question: How much should the government influence the economy of a country? And there are many answers. Regulating the public goods in a manner where the negative externalities would be minimized, government’s role is to uphold freedom of the market with government providing safety and stability only for essentials. If there are too many regulations by the government, it will slow down and stop jobs, prices will go up and the economy will slow down. If there is no government at all everyone will act in their own interest and there will be too many negative externalities and the market will become crazy. Still, if the market has more space†¦show more content†¦In the years of communism, there were two abortions in every single live birth. Since the collapse of Soviet Union, the abortion rate has fallen by half, because contraceptives were available. Both, Wheelan and Adam Smith show us how it is necessary just a little intervention from government if we want the market economy to work smoothly. Adam Smith shows the ten unskilled workers who work in a pin factory. First they don’t know how to produce them and their work is slow. They make only twenty pins a day. But, because their goal is to make as big profit as possible, they start to divide their job into branches where everyone does a special job. By doing it often, they start to know they job better and they rarely commit any mistake. In the end, they make forty-eight thousands pins a day. So, because the market’s goal is to maximize their profit (pins) it is better to have minimum interference from government unless they need its help. A similar example was used by Wheelan in page 68 when an accelerator was to be built either in Texas or Illinois. Illinois was more attractive site because it already had a particle accelerator and a major federal laboratory, still the project would be sited in Texas. The reason was that it was President’s Bush birthplace. In the end, government spent $1 billion on the project and then abandoned it. This means that themarket tends to allocate their resources where they earn the higher return and profit (the same as pins).Show MoreRelatedGovernments Role in the Fashion Industry1265 Words   |  5 Pagesindustry. However, government involvement in the market economy aids in controlling and protecting both the consumers and the fashion industry itself. Role of government in market economy Government plays a crucial role in the market economy by ensuring the laws and regulation are abide by, and control the production of the private sectors, although, over the years its efforts in controlling such economies are minimal and insignificant. 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