Instructor`s name Economics


Marketsare controlled by various forces and governments play a key role inregulation. Market failure is a situation whereby the amount of aproduct in demand by consumers does not match the quantity suppliedby producers. Market failure may result from imbalances in certainforces in the market and in particular government involvement.

Theextent through which one person’s action affects another and theassociated cost is not reflected in the market prices is referred toas an externality. There are both positive and negativeexternalities. Positive externalities refer to benefits that areinfeasible to charge to offer while negative externalities are thecosts that are infeasible to charge to fail to offer. The governmentis responsible for regulating these externalities in order to ensurea stable market (Stiglitz23).For example manufacturers are increasingly being blamed for pollutingthe environment. Their actions affect consumers in many ways not tomention the reality of global warming. Governments have come to therescue of the situation by imposing policies that ensure thatproducers pollute less as they try to satisfy market demand and makeprofits. Although governments engage in regulating manufacturers,they have not been able to achieve total control of reducing theeffects of such externalities. The government should focus more onregulating the industries even if it means passing the costs of suchactions to consumers.

Publicgoods are services or programs that are offered by the government tothe public including welfare programs, health, education, researchand development, roads and social programs. Most of the serviceslisted under public goods are obviously essential services andcontribute largely to the general development of a country or asociety (Stiglitz67).As such governments should be able to regulate these services inorder for it to achieve its social, political and economicdevelopment. Whereas public goods have in general benefited thepublic, there has been controversy over the provision of these goodsand the public does not always appreciate their provision. A recentexample is the Obamacare or the Health Care Act in the United States.The U.S government places significance in the health of its people aspart of human rights and also to increase its people’sproductivity. However, the health plan fails to meet people’sexpectation for various reasons including political interest. It isnot always possible to please every individual in providing publicgoods but the government must ensure that public goods are availableand accessible to every citizen.

Resourcesare important in the development and growth of a country and propermanagement and distribution of resources is key to economic andsocial stability. The government must ensure that it engages activelyin resource distribution and management. Policies must ensure thatresources are equally and fairly distributed and for the greaterbenefit of the public (Stiglitz76).In fact, I resources cannot be separated from the provision of publicgoods. For instance, roads should be constructed in a manner thatthey serve all individuals in a positive way. Health plan as wellshould not disadvantage the disadvantaged but rather should promoteequality.

Ultimately,governments have an important role in regulating markets,externalities, public goods and resources. There is no governmentthat can succeed without regulating these factors. To be effective,policies should guide governments to achieve optimal benefit fromproviding public goods and also regulate externalities.


Stiglitz,J. E. &quotMarket failures, public goods, and externalities.&quotDevelopmentStrategy and the Market Economy(1997).