Essays on Role of Government in Market Economy Essay

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The paper "Role of Government in Market Economy" is a perfect example of a macro & microeconomics essay.   In recent times, no area of economies has continued to experience abrupt changes as the marketing economy. These changes have increasingly had intense implications for the way the role of the state or government has been viewed by economists, development practitioners and international organizations. Of importance, is that the role of the government in the market economy is not to take over the marketplace but to ensure that there is an improvement in the functioning of the market economy.

This means that any decision that is made to intervene or regulate in the play of market forces should carefully balance the benefits against the cost of any regulations that any intervenes will bring. It is also important to note that in a free market, a market whereby the prices are mainly controlled by the demand and supply, the government has little economic participation and is said to be basically a bystander whose main role is much of that of an umpire, to enforce rules and also resolve issues around the formulated rules.

Therefore, the government is not responsible for the basic creation of the rules. Creation of legal structures One of the major roles of the government is in the creation of a legal structure in the market economy. Lack of this framework or structure will lead to the collapse of the market economy. The market economies are not licensed for theft or exploitation inasmuch as it is prone to abuse. Of major concern is the little trading that takes place in a state or country when the basic legal rights of producers and consumers to trade and own economic resources are not recognized and well protected (Lane & Ersson, 2002).

This explains the reason the government does keep account of houses and lands and goes to the extent of enforcing contracts between sellers and buyers in all kinds of goods and services. The buyers and sellers need to have the assurance that the transaction of the services or goods is carried out are effective and genuine (Tanzi, 2011). This is also applied to the workers, either collectively or individually in unions, agreeing to work conditions and wages with their employers.

If the assurances are not given effectively and routinely and if an impartial justice system which is fair is not in place, all the market dealings will eventually become difficult and expensive to complete.


Dixon, T. & O’Mahony J. (2010). The Market Economy: 2010 Edition: Year 11 Preliminary Economics. Sydney: Pearson Education Australia

Lane, J. & Ersson, S. (2002). Government and the economy; a global perspective. New York: Continuum International Publishing Group.

Stonecash, R., Gans, J & King, S. (2011). Principles of economics. London: CengageBrian

Tanzi, V. (2011). Government versus markets: The changing economic role of the State. Cambridge: Cambridge University Press.

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