Essays on Governments Role in a Market Economy Essay

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The paper "Government’ s Role in a Market Economy" is an outstanding example of a marketing essay.   Theoretically, the government’ s role in a market economy is limited to restoring and promoting conditions, which are necessary for the working of a free market, and producing and/or distribution of goods that the players in the free market cannot produce or distribute. Specifically, it is argued that in ideal market conditions, the society would only care about efficiency, therefore restricting the government’ s role in the economic sphere to a bare minimum. Considering that the markets are anything but ideal, governments usually intervene in market economies; specifically, it becomes the governments’ duty to define private property rights, and also ensure that they are implemented; to regulate business; provide certain public goods; levy taxes; and redistribute income (Baumol and Blinder, 2011).

In other words, governments assume a managerial role if only to correct market failures such as externalities and monopolies among others; and business cycles such as recessions or economic booms. Governments’ roles in a market economy are also necessitated by the fact that although the society cares about efficiency, it also cares about other issues such as economic fairness, and the merits/demerits of goods. Government’ s role in the market In a market economy, the government takes up the role of allocation, whereby, it corrects market failures, and also considers the merit and demerit of goods sold in the market.

Additionally, the government assumes the role of redistribution whereby, it comes up with a fair tax structure that considers the income levels of different groups of people with a view to enhancing economic fairness. Additionally, the government has a responsibility of redistributing market resources either in monetary form or in-kind.

Finally, the government has a stabilization role, whereby it engages the economy either through fiscal or monetary policies. Allocation role Through allocation, the government in a market economy corrects market failure by addressing market externalities, monopolies, public goods, and the merit/demerit goods.


Arnold, R. A. (2010). Microeconomics. Boston, MA: Cengage Learning.

Baumol, W. J. & Blinder, A.S. (2011). Macroeconomics: Principles and Policy. Boston, MA: Cengage Learning.

Dwivedi, D. N. (2010). Microeconomics-I. New Delhi: Pearson Education.

Lane, J. & Errson, S. O. (2002). Government and the Economy: A Global Perspective. New York: Continuum International Publishing Group.

Tanzi, V. (1997). “The changing role of state in the economy: A historical perspective.” IMF Working Paper, WF/97/114. 1-28.

Walsh, C.E. (2003). Monetary Theory and Policy, Part 5; Parts 199-216. London: MIT Press.

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