A free market driven by the shareholders’ self-interests is often considered as the ideal economy; however, government intervention is always needed more or less.
Governments aim to benefit the society as a whole by enforcing rules. For example, Russia has imposed strict regulations on the consumption of alcohol in the attempt to improve public health. Nonetheless, the effectiveness of government’s regulation is to be questioned. The Soviet’s drastic measure in 1985 led to a surge in illegal trading of alcohol. This is because vodka is considered as a basic need in Russia, and the demand for liquor is highly inelastic. A large change in price would not necessarily lead to an significant change in quantity demanded. This could also be the reason why the government tempted to cut the production quantity directly. Yet, the government failed to achieve its goal as the underground market expanded.
The market is difficult to control even by strict rules, and it is as well hard to anticipate the consequences brought by the rules; but the government should continue intervening through fiscal policy. Even if it would not have a strong direct effect on the market, the government can receive more budget and use that to benefit the society in other ways (i.e. improving education, infrastructure, health care) depending on its priority.
