ES - Roles of Government Lesson

Roles of the Government

The government has several roles in a mixed economy. Five of them are:

  1. Provide public goods and services
  2. Redistribute income
  3. Protect property rights
  4. Resolve market failures
  5. Regulate the economy

Why Provide Public Goods and Services?

The government provides public goods or services if it would be inefficient to make consumers pay individually and impossible to exclude anyone who did not pay for it (free riders). Anything you can’t be excluded from using if you did not pay for it is a public good.

What goals is the government hoping to achieve by providing the following public goods and services?

  • Roads and Interstates: efficiency
  • Public or National Parks: equity
  • Police and Fire Protection: security
  • National security (military): security
  • Public Libraries: equity, growth
  • Public Schools: equity; growth

Why Prevent Market Failures?

Mixed market economies use government involvement and provide public goods in order to be more efficient and solve market failures. A market failure is a situation in which the market does not distribute resources efficiently on its own. The government encourages positive externalities (ex. vaccines) and discourages negative externalities (ex. pollution); remember an externality occurs when someone’s use of a good or service hurts or helps another person.

Why Redistribute Income?

In market economies, wealth is spread unevenly. Mixed market economies try to achieve equity and security by collecting taxes from individuals and redistributing some of that money through welfare (government aid to the poor).

Examples: Unemployment Insurance, Social Security, Worker’s compensation, Medicare and Medicaid, Government Funded Scholarships, etc.

Why Protect Property Rights?

The government protects property rights to achieve the goals of security, growth, and freedom. The Constitution guarantees important rights that allow people to engage in business activities. Private property is protected in the U.S. Constitution by the 5th and 14th Amendments. Private property includes homes, cars, boats, etc., as well as intellectual property like inventions and ideas through copyrights and patents.

Government Regulation and Deregulation

Businesses must follow government rules to protect public interests like the environment and consumer health and safety. The negative impact of regulations is that they often raise costs, which cause prices to rise.

  • Examples of regulations: 
    • FDA makes sure food and drugs are safe
    • OSHA sets workplace safety standards

Deregulation occurs when the government removes restrictions on businesses. While deregulation can lower costs and prices, negative effects include pollution and less public health and safety. The airline, trucking, banking, and railroad industries have all been deregulated.

Roles of Government Vocabulary Practice

Roles of Government Practice

IMAGES CREATED BY GAVS