The whole issue of the legitimacy of government intervention in the housing market is particularly pertinent at the present moment.
The role of the government is to protect property rights, uphold the rule of law and maintain the value of the currency. State owned industries tend to lack any profit incentive and so tend to be run inefficiently. Politicians don’t have the same market discipline of seeking to maximise the use of limited resources. Privatising state owned industries can lead to substantial efficiency savings.
The consequences of Government intervention are that it could benefit lenders more than borrowers or have the interest of builders in mind. In a free market system, governments take the view that markets are best suited to allocating scarce resources and allow the market forces of supply and demand to set prices. The government is flailing around trying to increase mortgage lending and mitigate the effects of falling house prices. Government failure 1. For example, state support of industri… It does not give good market environment to everyone. Government intervention is the immersion of the government in the market in terms of the alteration, modification, implementation, regulation, and monitoring of the situation the market is in making sure it is in a healthy position with no leeway for any negative externalities or abnormalities.
This activity is pretty ineffectual and we are right to condemn it as social engineering.
There is however a lesson to be learnt from what has happened with government intervention within the housing market, namely the global economic crisis.
Government failure. Above all, the national housing market specifically in Toronto and Vancouver needs to be strong and the Government needs to do what it can …
It can also pass rules and regulations which hinder the development or even the maintenance of …
If the society is unstable because of distribution of wealth, it affects negative effects like strike, unemployment and even crimes. 3. Any strategy that doesn’t put homeowners first could negatively impact the market and citizens in the long run. Government intervention causes more problems than it solves. The disadavantages are; The government interferes with the market and prevents some private development from occurring which would occur naturally without its intervention. First of all, the government needs to intervene to the market for fair distribution of wealth. When governments spend on public goods and merit goods, they may create excess bureaucracy and inefficiency. Find out more. For example, the government may take decisions for short-term political consideration which lead to an inefficient outcome.
2. 4. Disadvantages of government intervention. The argument, government intervention in the housing market is systemically flawed, due to sub-optimisation of the economy and erosion of free markets is incorrect. Government failure is a term to describe how government intervention can cause its own problems.
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