What are the similarities between market failure and government failure?

market failure and government failure relate to inefficiency. In the financial markets, ineffectiveness is recognized when someone else is not on the other side of the trade. For example, if someone in the financial transaction benefits or profits, someone else should lose, otherwise the market failed. The government fails when it also creates inefficiency, usually by hitting the markets in a futile attempt to streamline markets. When the government saves the corporation financially, it can be expected to hit similarly when other similar businesses are under pressure.

There are some institutions and industries in the economy that are considered too large and too important for the capital markets and market jobs. When there seems to be a large institution or the entire industry, the government could enter to prevent colossal failure. The government can do this by expanding the help of a non -threshing package that will maintain a corporation or industry above water.

It is possible that the money used to assist the market is taxpayedíka. Also, the assistance that the government extends can also be a loan that must be repaid for a predetermined period. Market failure and government failure could occur unless the lifeboat offered does not achieve what has been designed.

If the government uses federal money to rescue markets and assistance turns out to be unsuccessful, for example, if financing should prevent large corporations from bankruptcy and these companies will become insolvent, the market failure and government failure occurred. It is possible that the government responds too quickly to the uncertain market situation. If the government interferes prematurely than to be stabilized, the result could again be failed in the market and government failure.

economists say government failure has greater results than market failure. Since taxpayers' money is often used to finance market saving if citizens do not refuse to decideThe thread of a corporation or industry may decrease. It may be particularly difficult for the public to promote rescue if managers in failed corporation earn excess salaries and bonuses. When politicians decide to intervene in the markets, the reasons should be clearly justified and adequate to prevent market failure and government failure.