Market Efficiency and Government Intervention Revisited Essay

Exclusively available on IvyPanda Available only on IvyPanda

Introduction

Negative externalities are the costs that arise from activities or processes that affect uninvolved parties who do not choose to incur such an outlay. On the contrary, positive externalities signify transactions that benefit a non-related party. For instance, a real estate agency that keeps its houses well-maintained may make the neighborhood benefit through increased home values.

We will write a custom essay on your topic a custom Essay on Market Efficiency and Government Intervention Revisited
808 writers online

Main body

The rationale for negative externalities, also referred to as social costs, arising is that the involved company does not usually consider such expenditures while computing the cost of production (Hoffmann, Inderst, & Moslener, 2017). Production expenses are often based on monetary information while social costs are not calculated in the same way. For instance, when a corporation chooses to start a new plant, it may fail to mull over the costs incurred by the surrounding community for drinking water that has been polluted by the company’s operations. On this note, products that should not be manufactured since their total expenses surpass the proceeds end up being produced when the social costs are not incorporated in the cost of production.

Intervention by the government is crucial as it seeks to charge companies for negative externalities. Governments may either employ laws (for instance, forbidding a given process) or market solutions (Bond & Goldstein, 2015). The application of strategies such as pollution penalties, allowing civil proceedings by private players to get paid for damages emanating from careless practices, and charging environmental levies may make the government realize two things. To start with, government intervention makes it possible to recover money to assist in fixing damages attributable to negative externalities (Ajefu & Barde, 2015).

Conclusion

Moreover, government intervention may help set a monetary value on social costs. This will go a long way to making companies obtain a correct figure for the cost of production and avoid manufacturing goods whose prices are less than the outlay incurred.

References

Ajefu, J., & Barde, J. (2015). Market efficiency and government intervention revisited: What do recent evidence tell us. Journal of International Business and Economics, 3(1), 20-23. Web.

Bond, P., & Goldstein, I. (2015). Government intervention and information aggregation by prices. The Journal of Finance, 70(6), 2777-2812. Web.

Hoffmann, F., Inderst, R., & Moslener, U. (2017). Taxing externalities under financing constraints. The Economic Journal, 127(606), 2478-2503. Web.

1 hour!
The minimum time our certified writers need to deliver a 100% original paper
Print
Need an custom research paper on Market Efficiency and Government Intervention Revisited written from scratch by a professional specifically for you?
808 writers online
Cite This paper
Select a referencing style:

Reference

IvyPanda. (2021, June 16). Market Efficiency and Government Intervention Revisited. https://ivypanda.com/essays/market-efficiency-and-government-intervention-revisited/

Work Cited

"Market Efficiency and Government Intervention Revisited." IvyPanda, 16 June 2021, ivypanda.com/essays/market-efficiency-and-government-intervention-revisited/.

References

IvyPanda. (2021) 'Market Efficiency and Government Intervention Revisited'. 16 June.

References

IvyPanda. 2021. "Market Efficiency and Government Intervention Revisited." June 16, 2021. https://ivypanda.com/essays/market-efficiency-and-government-intervention-revisited/.

1. IvyPanda. "Market Efficiency and Government Intervention Revisited." June 16, 2021. https://ivypanda.com/essays/market-efficiency-and-government-intervention-revisited/.


Bibliography


IvyPanda. "Market Efficiency and Government Intervention Revisited." June 16, 2021. https://ivypanda.com/essays/market-efficiency-and-government-intervention-revisited/.

Powered by CiteTotal, citation style generator
If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda. Request the removal
More related papers
Cite
Print
1 / 1