Government Intervention in Market Mechanism: Harm or Good?

Running head: ECONOMICS ASSIGNMENT
BA/BSC:
YEAR 1/2/3
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1ECONOMICS ASSIGNMENT

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Table of Contents
Introduction:...............................................................................................................................2
Market function with government intervention:........................................................................2
The effectiveness of market without government intervention:................................................5
Governmental policies to improve macroeconomic scenario:...................................................6
Conclusion:................................................................................................................................7
Reference:..................................................................................................................................8
Self-reflection:..........................................................................................................................10

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Introduction:
There has been long-standing debate regarding the fact that whether the government
should intervene in the market mechanism or it need to refrain itself from it for the better
growth prospect of the economy. Though the different economists showcased different view
regarding the government’s intervention policies, however, most of them have refrained from
drawing the line of final verdict (Borner et al. 2016). During the period of great depression in
order to showcase the importance of government intervention in the market economy Keynes
strongly argued for the demand management policy (Brady 2018). Contrary to this, the
historical economic idea regarding the market mechanism shown by the Smith, argued in
favour of the refrainment of the government’s intervention for the better growth prospect of
the economy (Averitt 2017). Thus, it can clearly be seen that different economists of different
time have provided different view regarding the governmental intervention in the market
mechanism. Under this context, this report is aimed to analyse whether the government does
more harm than good with its interventionist policy or not. In addition to this, this report is
aimed to discuss the Governmental policies to improve macroeconomic scenario in order to
showcase the importance of the governmental intervention in the economy.
Market function with government intervention:
As it can be seen that most of the previous researches have showcased that it is
subjective in nature that whether the government should intervene in the market policies or
not and it largely depends upon the market structure of the respective economy. However,
through the theory of the Keynes, it can be seen that government should intervene in the
market because it is one of the major resort that can entice the market demand and lead the
economy towards growth (Bond and Goldstein 2015). Through the AD-AS model, it can be
seen that as the demand rises, it can effectively enhance the productivity of the economy and
lead the economy to further growth in long run. LRAS being considered as fixed, if demand