Essays on The Role of Government in Market Economy Essay

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The paper "The Role of Government in Market Economy" is a good example of a macro & microeconomics essay.   Economics entails the study of market economies. A market economy is an abstract image that involves interaction among human beings or actors under specific conditions. These set conditions include specialization, use of money, a system of private and free enterprises (Nelson, 2004). In the United Kingdom, government involvement in the market economy has been targeted to enhance effective market competition where possible and to promote consumer protection as far as their interests are concerned.

Government participation has tremendously capped the prices charged by the dominant companies for the purpose of promoting efficiency and fairness, while at the same time ensuring that they get a return on their investments (Daly, 2005). Competition in the markets has contributed to some extend material well-being of consumers however, they have their own flaws. Much of these benefits can be realized when the government takes part in the market economy by mending these flaws and controlling the harsh tendencies portrayed by the market economy (Nelson, 2004).

Therefore, it is important to understand the role of government in the operations of the market economy, and they include the following. The government has basically three economic functions to play in the market economy. The functions include promoting equity, increasing market efficiency, and enhancing economic stability and growth (Nee, 2000). Efficiency is achieved through encouraging competition, availing public goods and preventing externalities such as pollution. A free and fair market economy is fully controlled when there are checks and balances of the perfect competition. Perfect competitive markets provide room for perfect allocation of resources which helps the economy to grow.

According to Baumol, (2003), when industries are subject to these checks, markets produce volumes of outputs that are desired by consumers by the use of efficient techniques and least inputs.


Nelson, R. R. (2004). The market economy, and the scientific commons. Research policy, 33(3), 455-471.

Heijdra, B. J., & Van der Ploeg, F. (2002). The foundations of modern macroeconomics.

Daly, H. E. (2005). Economics in a full world. Scientific American, 293(3), 100-107.

Nee, V. (2000). The role of the state in making a market economy. Journal of Institutional and Theoretical Economics (JITE)/Zeitschrift für die gesamte Staatswissenschaft, 64-88.

Gwartney, J., Lawson, R., & Norton, S. (2008). Economic Freedom of the World 2008 Annual Report. The Fraser Institute.

Baumol, W. J. (2003). Welfare Economics and the Theory of the State. The Encyclopedia of Public Choice, 937-940.

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