Capitalism requires government oversight to ensure stability and the public good
Capitalism is a social, economic and political system where capital assets are owned and controlled by private persons, where labour is purchased for wages, and the price mechanism is used to allocate resources (Pearce, 1992). Whether government oversight is necessary within modern capitalism to ensure stability and the public good is a question that divides economists and politicians even within political or economic ideologies. For the most part, I believe governments should ensure minimalist intervention in the free market to maximise individual freedom, utility, and to ensure resources are allocated according to consumer behaviour and thus are allocated efficiently. …show more content…
Specifically and consecutively, I believe government oversight is needed in the market system in order to rectify instances of market failure such as asymmetric information and externalities and public goods, fulfil our social goals and ensure the public safety and quality in the market situation, and to protect future nations and to maintain economic stability especially in times of crises as evidenced by the global financial crisis.
It was Adam Smith who said that “it is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but to their regard for their own interest” (Smith, 1776) and in this way a liberal capitalist system is sound. Individuals will inevitably pursue their own interest, and as market behaviour responds to consumers, in doing and so it follows that in a free market system resources are allocated efficiently and consumers are able to purchase what they choose with prices reflecting the demand for the product. In this way, it can be argued that only through a liberal capitalist system with market situation and minimalist government intervention do we get …show more content…
This occurs when there is not a lot of competition in the market, due to competitors being driven out or absorbed. When this occurs, sellers may restrict supply with the aim of extracting higher prices and higher profits which causes an under-allocation of resources to the production of these goods. The classic example of this is health-care; there is assumed to be perfect competition between hospitals, but the nature of health care and public expectation prohibits competition of sub-par health providers and life-threatening situations, you are more likely to go to the nearest hospital. Therefore if unchecked, local hospitals – especially in the U.S. with their current lobbying laws - are essentially a monopoly which can charge whatever they want. Another failure is that in perfect competition, full information is assumed, yet there are market situations where asymmetric information occurs where one party has more (or better) information than the other in an exchange (Macgregor & Salla, 2010). In the market for used cars, for example, the uninformed buyer will have less information than the owner, which will result in a too-high selling price an over-allocation of resources towards used cars. In most cases it is the consumer being adversely affected, and so for consumer
Capitalism is a social, economic and political system where capital assets are owned and controlled by private persons, where labour is purchased for wages, and the price mechanism is used to allocate resources (Pearce, 1992). Whether government oversight is necessary within modern capitalism to ensure stability and the public good is a question that divides economists and politicians even within political or economic ideologies. For the most part, I believe governments should ensure minimalist intervention in the free market to maximise individual freedom, utility, and to ensure resources are allocated according to consumer behaviour and thus are allocated efficiently. …show more content…
Specifically and consecutively, I believe government oversight is needed in the market system in order to rectify instances of market failure such as asymmetric information and externalities and public goods, fulfil our social goals and ensure the public safety and quality in the market situation, and to protect future nations and to maintain economic stability especially in times of crises as evidenced by the global financial crisis.
It was Adam Smith who said that “it is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but to their regard for their own interest” (Smith, 1776) and in this way a liberal capitalist system is sound. Individuals will inevitably pursue their own interest, and as market behaviour responds to consumers, in doing and so it follows that in a free market system resources are allocated efficiently and consumers are able to purchase what they choose with prices reflecting the demand for the product. In this way, it can be argued that only through a liberal capitalist system with market situation and minimalist government intervention do we get …show more content…
This occurs when there is not a lot of competition in the market, due to competitors being driven out or absorbed. When this occurs, sellers may restrict supply with the aim of extracting higher prices and higher profits which causes an under-allocation of resources to the production of these goods. The classic example of this is health-care; there is assumed to be perfect competition between hospitals, but the nature of health care and public expectation prohibits competition of sub-par health providers and life-threatening situations, you are more likely to go to the nearest hospital. Therefore if unchecked, local hospitals – especially in the U.S. with their current lobbying laws - are essentially a monopoly which can charge whatever they want. Another failure is that in perfect competition, full information is assumed, yet there are market situations where asymmetric information occurs where one party has more (or better) information than the other in an exchange (Macgregor & Salla, 2010). In the market for used cars, for example, the uninformed buyer will have less information than the owner, which will result in a too-high selling price an over-allocation of resources towards used cars. In most cases it is the consumer being adversely affected, and so for consumer