Government Role in Economics essays
In the United States, the role of our government is a complicated one. Our government has been created for many reasons and it's actions have a profound effect on economic and social performance. It is the responsibility of the government to interact with the private sector in effort to create a more equal and proficient society. It does this by protecting our economy against inefficiencies or problems created by dramatic increases or decreases in our economic state, handling externalities, and providing public goods.
Dramatic Disturbances in our economy can wreak havoc on our society as a whole. During an economic boom, or growth, employment and production rise, while unemployment falls. Cost of living and most other prices typically rise as well. On the other hand, during a collapse in our economy, or a depression, the production of goods and services weaken, there is normally a reduction in employment, while unemployment rises. Our government is responsible for minimizing these ups and downs in our economy. An example of this is the introduction of unemployment insurance, welfare and other programs so that a depression or recession will not affect our society's standards too dramatically.
In a market system if a person chooses not to pay for a product or service they do not get to reap it's reward. A producer will not provide a good or service to someone who chooses not to pay. However, there are some instances where it is important that no one be excluded from the benefits of a particular good or service, for example, public health and welfare programs, national defense, education, roads, research and development, national and domestic security, and a clean environment all have been labeled public goods. It is the function of the government to determine and finance these goods and services through taxation.
According to Tyler Cowen, "externalities occur when one person’s