ECOCB/535: The Digital Economy
Comp 2/Module 4 – Reflection
Assignment Content
Write a response in a total of 500 words:
Government interventions into markets can sometimes succeed, but sometimes they make the situation worse. Explore 2 examples of government intervention that did not work. Explain why the intervention made things worse, and what could have been done differently to improve the situation.
Support your analysis by including:
o What the situation was
o What the intervention sought to solve
o What happened
o What might have been done differently
Answer preview
Governments often intervene in situations that are faced with market failure to help improve the outcomes. However, there are cases in which the intervention by the government results in economic inefficiencies. The unintended causes that arise from government interventions are the primary reasons for failure. In the world today, some of the examples of government failure in the market include the Common Agricultural Policy (CAP) of the European Union. Another example is subsidizing mass transit transport such as the South Korean high-speed rail line. The Federal government continues to increase mass transit subsidies despite the significant losses due to the decline in this transport.
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