Government Intervention and Market Dynamics

This assignment delves into the role of government intervention in various market contexts. It examines theoretical frameworks surrounding market efficiency and the rationale for government involvement. The analysis considers different types of government interventions, such as regulation, taxation, and subsidies, and their effects on market outcomes like prices, quantities, and consumer welfare. The assignment also explores empirical examples of government intervention in areas like education, healthcare, and finance, evaluating both the intended and unintended consequences of these actions.

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Government Intervention in the Market Economy.
Student’s Name
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Explain the terms internal environment and external environment.
Internal environment refers to the conditions factors or events inside the organization that affect
its line of choice and action to be specific employee's behavior. Even though certain elements influence
the entire organization, others affect the manager singly. The leadership style affects the employees
directly. The progressive managers like encouraging the employees to decide on their own while the
traditional managers give direct information or instructions. The basic factors of an internal
environment are always leadership styles, mission statement and organizational culture in according to
Lee, Lee and Pennings, (2001, pg 303).
The mission statement: this is a statement which outlines why an organization exists and what
the organization represents. An organization statement tends to expound on the general purpose of the
organization encompassing the other characteristic which differentiates it from the firms of its same
type. Not all mission statements become effective in the business environment, but the effective
mission statements usually lead to effective input. The effective mission is very critical in today's
highly competitive environments and thus should be inclined towards the consumers.
An appropriate mission statement is precise in recognizing some intents of the firm including
consumers to be served, products and/or services to delivered and produced, where the products and/or
services will be produced and the ideology that will be deployed. The policies of the company are the
guidelines that the way specific situations in the organization are handled. Like the policies in the
colleges and educational institutions have maintained prerequisites, admittance, waivers, and grade
appeals, the firms in the like manner come up with policies to guide the managers in making decisions
concerning the frequently occurring circumstances inside the organization. The policies of a firm
should always concur with the with the mission statement for it shows off the personality of the
organization (Hueske, Endrikat, and Guenther, 2015 pg 53).

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The organizational structure: this refers to the hierarchical arrangement of people and task. This
structure finds out the information flow mechanism within the organization, the assignment of
responsibilities to various departments in the organization and giving out of the center of decision-
making in the organization. Mostly organizational charts are utilized to give a graphical representation
of the structure of companies. These are simply the graphical display of the line of authority and
information flow within the organization (Lee, Lee and Pennings,2001, pg 334).
The organizational culture: this element refers to the personality of the organization. The
organizational culture makes it unique and determines the activities of the members. It has four main
components; heroes, values, rites and rituals and social network.
Values refer to the fundamental beliefs that outline the success of the employees in the
organization. For instance, universities place high values on the publishability of the professors. In
case and a member of the faculty is published in a professional journal, he may increase his
opportunities of getting tenure. The universities always try to retain the professors during their
academic careers.
Next is heroes which is an instance of an individual who exhibits attitude, image and values of
an organization while acting as a mentor to other employees within the organization. A hero can be the
founder of the entire organization, but it's not confined to be a founder as it can also be a daily who is
hardworking (Grönroos, 1981, 238).
The third one is the Rites and Rituals: these are the occasional routines which the firm organizes
to identify high-performing workers. Company gatherings, awards banquets, in addition to the
quarterly meeting can be avenues to appreciate the employees that have done outstanding jobs. These
steps are taken to help inspire every other employee in the company for the rest of the year (Meyer, and
Scott, 1992).

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Finally, is the social network: this generally to the informal or unofficial way of communication
within the firm, at times referred to a grapevine, as it comprises of those who have failed and the heroes
too. This network forms a platform for learning the cultures and values of the organizational culture do
produce an organizational climate which has the general workplace tone and the workers morale as its
components (Kreps, 1986). The attitude of the employees will determine the atmosphere of the work
environment. Resources do refer to the infrastructure, facility, machinery, people, information,
finances, supplies and the equipment's available for the use by an organization. The management of
philosophy is defined as the personal beliefs and value of the manager concerning individuals and work
and the manager can always regulate it. As per McGregor, the philosophy of the manager brings about
self-fulfillment prophecy. One manager handles his employees as kids who are given constant
instructions while the other manager handles his employees as competent adults able take part in
making decisions at work. All these views of a manager impact the behavior of a worker resulting in a
self-fulfilling prophecy (Kreps, 1986).
External environments
There refers to all conditions, factors or events from the outside that may affect the
organization. We may have directly interactive forces or indirectly interactive forces. The directly
interactive forces are the factors which impose the first-hand effect on the organization like a new
entrant into the market. The environment which has a distant impact on the organization.
Implementation of new laws may be an example that needs some change within the company (Ewusi-
Mensah, 1981, pg. 312).
1. Directly interactive environment (Ewusi-Mensah, 1981, pg. 305)
Customers who need satisfaction from the products and services they buy and use.

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The owner who views the managerial team to take care of their interest and get a Return on
Investments.
Suppliers who need effective communication, strong working relationship and timely payments to offer
the required resources within the organization.
Competitors who present threats targeting the consumers in the market have similar goods and services.
2. Indirectly interactive environment
The force may impact one company differently from another company due to nature specific
business the firm is dealing with. For instance, a company specializing in technologies will be more
affected than the company that only uses computers in case of software updates or upgrade. The forces
encompass:
The technological wing: this affects the scientific processes converting inputs to
outputs. The organizational success of many companies relies on the mechanism of
knowing and responding to the external changes in technology (Hueske, Endrikat, and
Guenther, 2015, pg. 51).
The economic wing: this does represent the condition of finance across the
world. Economic conditions that pose crucial concerns to firms encompass rate of
unemployment, interest rates, GNP (Gross National Product) and inflation. However,
some business can thrive in poor economic conditions examples is traditional fares at the
economic downtown point.
The global wing of the forces: refers to the factors in some other country that
impacts the organizations within the concerned country. Even though the fundamental
management functions of staffing, organizing, leading, planning, staffing and controlling

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are similar for both domestic and international firms, still managers face challenges and
risk on an international scale. It may come in the form of problem with the country like
mad cow disease and language barriers are all global risks they would face (Bossaerts,
and Hillion, 1991, pg. 514).
Assess the View That "Government Intervention in A Market Economy Is Necessary To Improve
The Environments In Which Businesses Operate"
Government intervention in the economy has been an important factor in economics. Free
market economists reason that the state intervention should be restricted because government
intervention results in inefficient resource allocation. On the other hand, others argue that government
intervene helps in various sectors of the economy. In this paper, we will discuss both sides of the
argument.
Government intervention essential.
1. Government intervention helps in enhancing equality.
Inequality in wealth, income and opportunity is usually manifested in the market as private
charity tends to be partial. Government intervention does the job of redistributing income within the
society.
Diminishing marginal return to income: the law of diminishing returns states that as one's
income increments, there is a diminishing marginal utility. In case one earns $2 million per annum, an
increment of your earning to $2.5 million per annum provide a marginal increase of utility. While when
if you are not employed and you survive with $50 in a week, 10% increment of your earning offers a
significant boost in life quality and living standards. Thus, income redistribution can result in ultimate
welfare gain in the society. Utilitarian viewpoint justifies income redistribution (Easterlin, 2005 pg.
248).

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Fairness
A free marketer can establish inequality via privilege and monopoly instead of capability and
handwork. Companies can exploit monopoly power to pay low wages to employees while charging
high prices to consumers without intervention. Intervention by the state can enhance greater income
equality looked as fairer (Dickens, 1999 pg 12).
Inherited wealth
Several individuals don't gain wealth by hard work but by getting born into wealthy families.
Wealth task can reduce this riches of the wealthiest to be utilized in educating those who are born in
poverty (Dickens, 1999, Pg. 17).
Rawls and Social Contracts
Rawl stated in his social contract that the ideal society is that which one would be impressed in
any condition he/she is born, not knowing the destination. As per the social contract, many wouldn't
like being born in a free market because it is dominated by the minority of the population if people
would choose where to be born they would select the one with fair regulation by the government
(Donaldson, and Dunfee, 1994, 253).
2. Government intervention to overcome failure in the market.
Public goods: provision of public goods like law order and national defense in a free market is
not recognized as there exists no fiscal incentive to offer goods with the free rider issue. A general
taxation via the government, therefore, is needed to offer public goods like roads and public houses to
the public (Krueger, 1990, pg. 13).

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Negative Externalities: In case of externalities in production and consumption, the free market
does not offer the most socially competent result. For instance, a profit-maximizing company will
assume the external cause of pollution via charcoal burning which may result in the fall of social
welfare (Worthington and Britton, 2009). Contrastingly environmentally friendly forms of energy
production like solar power have a positive externality. Taxing pollution cost causing productions and
utilizing the subsidy to enhance other energy production forms leads to a net gain in social welfare
(Poterba, 1996, pg. 281).
Positive externalities or merit goods:
Service like healthcare and education are not exclusively public services even if they are called
public goods. Provision of these goods in free markets is unequal and sh0ddy. General education
system offered by the government that everyone can obtain an as strong social beneficial education
(Fiorito, and Kollintzas, 2004, pg. 1369).
Regulation of power of monopoly:
Government control can help in lowering the prices and increasing economic efficiency that the
monopolies would have set higher to exploit consumers (Stiglitz,1993, pg. 42).
Macroeconomic Intervention:
There is always a steep fall in the spending of private and sector and investment during
recessions resulting in lower economic growth. In an event that the state reduces the expenditure at the
same time, a bigger decline of the growth of economy and confine reduces. During deep recessions,
governments do borrow funds from the private sector and use the money to utilize the unemployed
resources. The collapse in the money supply may call for the government or central bank to print
money. Likewise, the state can see the need of preventing the economic boom or credit explosion.
According to Keynesian economists, the government can positively impact the economy using the

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fiscal policy. Monetarists believe that monetary policy can enhance economic stability even thou
independent central bank may not be perceived as a government intervention (Hibbs, 1977, pg. 1479).
An Argument Against Government Intervention.
Public owned industries are inclined to no profit incentives, therefore, are ten to suffer
inefficient running. Privatizing them, therefore, can result in significant revenue or savings
most politicians lack the market discipline of aiming to optimize the utilization of the limited resources.
Extra bureaucracy and inefficiency may come up when government incur on public and merit goods.
Government intervention can be more problematic. For instance, support of companies by the state can
enhance the survival of ineffective companies. Governments bailing to banks may establish a moral
hazard (Worthington and Britton, 2009).
At best intervention by government creates nothing new but additional problems like an
accumulation of public debt as real business cycle theorists argue. Lack of government intervention can
never allow the existence of an ideal society model. The most liberal economists will still need state
security property rights in addition to the national defense. The assessment still ends in government
intervention.

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References
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information systems. Accounting, Organizations and Society, 6(4), pp.301-316.
Lee, C., Lee, K. and Pennings, J.M., 2001. Internal capabilities, external networks, and performance: a
study on technology‐based ventures. Strategic management journal, 22(6‐7), pp.615-640.
Meyer, J.W. and Scott, W.R., 1992. Organizational environments: Ritual and rationality. Sage
Publications, Inc.
Kreps, G.L., 1986. Organizational communication: Theory and practice. Longman Publishing Group.
Grönroos, C., 1981. Internal marketing–an integral part of marketing theory. Marketing of services,
236, p.238.
Hueske, A.K., Endrikat, J. and Guenther, E., 2015. External environment, the innovating organization,
and its individuals: A multilevel model for identifying innovation barriers accounting for social
uncertainties. Journal of Engineering and Technology Management, 35, pp.45-70.
Poterba, J.M., 1996. Government intervention in the markets for education and health care: how and
why?. In Individual and social responsibility: Child care, education, medical care, and long-
term care in America (pp. 277-308). University of Chicago Press.
Bossaerts, P. and Hillion, P., 1991. Market microstructure effects of government intervention in the
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Donaldson, T. and Dunfee, T.W., 1994. Toward a unified conception of business ethics: Integrative
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Dickens, L., 1999. Beyond the business case: a three‐pronged approach to equality action. Human
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Stiglitz, J.E., 1993. The role of the state in financial markets. The World Bank Economic Review,
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