In most of the countries, government has intervened in market system, however, it’s still a controversial issue due to the fact that government intervention has both positive and negative influence on economy.
Generally speaking, government intervention is when government gets involved in the markets and takes action to improve economic efficiency–minimize input, waste and maximize social welfare. Government may intervent the market by setting prices, limiting the amount of productions, and formulating regulations, etc. One of the most important benefits is that it helps to fix market failure and to reduce the cost and risk of entrepreneurs. On the other hand, it also discourages innovation, the regulations will erect barriers to the development of new, improved products and production processes. It will discourage the research efforts and distort the choice of technologies that are explored and adopted. Therefore, entrepreneurs and firms will be somehow dependent on the government.
As far as I am concerned, whether or not should government intervene in market system depends on the methods they use and the goods. Interventions in goods like alcohol, medicine, and cigarettes are needed. Further more, government should attach more importance on public goods, such as public infrastructures, clean environment, security and education, in order to reduce depletion and improve social welfare.
