What is the role of the government in a economic system?

Answer 1

In Public Economics, the generally preferred purpose of the government in the economy is to allow for free operation unless there is incidence of market failure (e.g.) lack of competition; informational asymmetry; externalities; etc.).

Answer 2

AnswerA market economy is one that is traditionally FREE from government interference, however it does require government assistance to function. This could be through facilitating privatized organizations through funds and R&D (Research & Development), deregulating the market and the rules of foreign trade or improving foreign relations in order to open up more opportunities for a prosperous economy. The government is allowed to be a PART of the market economy, and its institutions and organizations fall under the public sector of the market economy. AnswerThe phase "Market Economy" is inexact, as it covers a wide variety of different forms of economic theory, which vary considerably on the role that government is to play. Generally speaking, there are two major forms of Market Economy which people are concerned with: a True Free Market (sometimes just shortened to "Free Market"), and a Mixed Market. The TFM is a theoretical construct, as it has not proved possible to implement in the real world; rather, it exists as an ideal to be striven for, according to proponents. All existing Market economies are what economists call a Mixed Market Economy.

Please see the various Related Questions for better discussion on the roles of governement in specific forms of Market economies.

Answer 3

1. Foreign Relations - Diplomacy and Defense

2. Incubate special research, business and development, such as small businesses, space research, job training, unemployment insurance and more.

3. Protect and regulate the sustainable use of Natural Resources.

4. Enforce and regulate fair and responsible business practices. Included in this is monitoring monetary policy, giving consumer protection and regulating banking practices.

5. Determine and enforce civil laws of property and conduct. This includes the freedoms of the press, religion and rights of property.

6. Provide public goods and services for the well-being of the community as a whole, such as infrastructure, vaccination programs, disaster relief, fireworks shows, public parks, basic healthcare, subsidized housing, public education and public utilities.

(These are things that the government provides better than private business for the community at large through pooling money and resources. There are more positive externalities for society when government provides public goods and services.)

AnswerThe question is a bit vague, as there are several different kinds of "Market Economy", each of which has a very different view on what the proper role of government is under that particular variation.

This answer pertains specifically to the Mixed Market Economy system, which is the system being used by virtually all current economies in the world today. Even within this broad category, the specifics of what a government's role is varies considerably, so this answer speaks in broad generalizations. (Consider that France, the United States, Russia, and even China have variations on a MME, so you can see what I mean about it being very difficult to name lots of specifics.)

Overall, the purpose of an MME is to provide the benefits of a True Free Market form of economics, while mitigating the bad side effects a TFM tends to produce. In an MME, the government is tasked with this responsibility - that is, the government is the arbiter of society worth of any economic activity. As such, the government uses laws, regulations, and a court system to prohibit, encourage, and adjudicate various types of economic activity.

In the base case, a government in a MME needs to provide the following functions:

1. A stable currency for all economic activity to be conducted in.
2. An independent, reliable, consistent legal and judicial system for the resolution of conflicts (both contractual, and regulatory)
3. A method to determine what economic activities are allowable - that is, some method that the society can use to set restrictions (or make encouragements) on various economic practices
4. Some enforcement system for #3, usually using #2 as the final arbiter

Most economists consider that the government have a monopoly on #1 (i.e. it should be the only entity able to issue and produce currency), but that it may (or may not) chose to share responsibilities of #2 to #4 with some private organizations. For example, in many modern societies, #2 is handled both through a public court system, and a private arbitration system.

In addition to the above, many societies using a MME consider the following to be general responsibilities of the government concerning economics:

1. Provision of a basic standard of living for the populace - this can come from direct government programs to the populace, or government subsidies to private enterprise providing such services (e.g. unemployment insurance, healthcare, pension systems, disability coverage)
2. Operation of certain natural monopolistic industries and services, whether through a government-run monopoly, or a heavily regulated private monopoly. (e.g. power distribution, water and sewer distribution)
3. Providing an educated populace, so that private enterprise can presume some baseline level of education in society (both for potential employees and consumers).
4. Creation and maintenance of public infrastructure for use by all (e.g. roads, waterways, etc.)
5. Provide government-level institutions which enhance (or promote) certain economic activity which has been defined as "societally good". (e.g. public-sponsored research or arts, trade-promotion agencies, etc.)
6. Provide institutions for regulation of the public commons; that is, things which must be shared by all. For example: the US's FCC to regulate sharing of the radio spectrum, the various Environmental regulatory bodies for protection of the common natural environment, various land-use and water-rights regulations, etc.

Functions such as treaties, national defense, internal policing, religious or personal expression, and acceptable social behavior are outside the scope of economics - thus, while they may be functions of government (and, may have some (or a lot) of economic impact), they are not specifically economic in nature, and thus not particular to a market economy.

Answer 4

According to mainstream, modern economic theory, the role of the government is to allow markets to operate unless a failure occurs, at which point an intervention is warranted to improve social welfare.

Answer 5

TO ALLOW THE FREE MARKET TO EXERCISE AS MUCH CONTROL AND INFLUENCE WITHOUT THE FEDERAL GOVERNMENT INTRUDING ESPECIALLY IN THE AREAS OF TAXATION AND REGULATION.