Government failure
Government failure, in the context of public economics, is an economic inefficiency caused by the government intervention, if the inefficiency would not survive in a true free market. The costs of the government intervention are greater than the benefits provided. It can be viewed in contrast to a market failure, which is an economic inefficiency that results from the free market itself, together with can potentially be corrected through government regulation. However, Government failure often arises from an effort to solve market failure. The belief of government failure is associated with the policy parameter that, even whether particular markets may not meet the specifics conditions of perfect competition invited to ensure social optimality, government intervention may gain matters worse rather than better.
As with a market failure, government failure is non a failure to bring a particular or favoured a object that is caused or featured by something else into existence but is rather a problem that prevents an able outcome. The problem to be solved does not need to be market failure; governments may act to develope inefficiencies even when an able market or done as a reaction to a question is possible.
Government failure by definition does not occur when government action creates winners as well as losers, making some people better off and others worse off than they would be without governmental regulation. It occurs only when governmental action creates an inefficient outcome, where efficiency would otherwise exist. A established feature of government failure is where it would be possible for entry to be better off Pareto improvement under a different regulatory environment.
Examples of government failure add regulatory arbitrage. Government failure may occur because of unanticipated consequences of a government intervention, or because an inefficient outcome is more politically feasible than a Pareto service to it. Government failure can be on both the demand side and the supply side. Demand-side failures put preference-revelation problems and the illogic of voting and collective behaviour. Supply-side failures largely sum from principal–agent problem. Government failure may arise in any of three ways the government can involve in an area of social and economic activity: provision, taxation or subsidy and regulation.