Ethics and Law in Business and Society - Market Failure and Government Failure - Assignment Example

Ethics and Law in Business and society Q1. Market failure A. Definition of market failure and government failure Market failure from an economist perspective is the inability of a market to satisfy demand due to insufficiency of goods and services. It occurs due to lack of proper distribution of resources among the participants in the market. It usually occurs in free market where the prices of goods are not affected by market forces such as supply and demand. In a normal market, changes in supply and demand usually results into equilibrium level. However, when the market fails, changes in supply or demand does not lead to equilibrium level of price. Economic and policy makers usually try to prevent market failure by analyzing legislations to ensure that a balance between competent market and individuals’ interest is achieved. Government failure from the political scientist point view refers to the inability of the government interventions to achieve a balanced allocation of resources in the markets. It occurs when the interventions lead to market failure. It can also be caused by politician’s lack of information and their focus on political ideology rather than the actual market problems. i. Of the two definition, the one best fits the policy problem of law is the market failure definition. According to the definition, the main cause of the problem is connected with free market without government regulations. According to the market failure definition, market participants, but not policy causes the resource allocation problems. B. Negative externalities Market failure usually results into positive and negative externalities. However, the effect of negative externalities is mostly felt by the society. It is a problem caused by a first party but it affects the third party. An example of a negative externality includes the effects of pollutants released in a water body by manufacturers. The pollutants are released by the manufactures. However; they do not only affect the manufactures, but other people who do not benefit from the profits acquired from the manufactured products. For instance, some of the pollutants released in the water bodies by manufacture may be toxic. This will have serious impacts on the people using the water. In addition, the pollutants will cause the deaths of aquatic animals such as fish that are sources of food to the community using the water. Reduction of the number of fish due to toxic substances released in water bodies may cause food shortage for the community. Such negative externalities usually occur in free markets where maximization of profits by a market participant negatively affects the society and other market players. In order to reduce the negative externalities, the government introduces regulation in various forms. An example of government regulation includes taxation of the products of those that cause the negative externalities. The amount of tax should be equal the mount of the negative externalities. Advantages of taxation are that it discourages consumers from buying the products from the manufacturer. Reduction in demand for the product will in turn discourage manufactures from producing more goods. As a result, fewer pollutants will be released in the water bodies. This helps in creating a positive social outcome. Government tax may be disadvantageous if the demand for the goods produced by the manufactures is inelastic. It means that only the consumers, but not manufacturers will feel the effects of price inflation. C. Public goods are things that are only provided by the government. Most of the public goods are inform of services. An example of a public good includes the street lighting. This good fits in the theory of market failure because of its non-excludability. It implies that the street light is not only used by those who pay for it, but also by those who do not pay for it. Everyone enjoys consumption benefits of such goods whether they pay or do not pay. In addition, the good fits in this theory because there is no consumption rivalry. It means that if streetlight is used by those who pay, its usage is not affected by non-payers. The free rider problem creates negative externalities. The problem is not experienced goods because suppliers can choose consumers of the products. For instance, they cannot supply the goods to those who do not pay for it. In order to reduce the negative externalities, the government has to tax people’s households and firms. 2. Public policy A. Policy foundation and policy type The policy I am studying is polluter pay. The policy is a basis of environmental law. The policy foundation that effectively describes the policy goal is the government action. This is because the policy is meant to change the behaviors of those that produce negative externalities through government action. The policy type that that suits the goal is regulatory because the government prevents behaviors that produce negative externalities using regulations such as taxes. B. Political feasibility I. What are the political hurdles in passing the bill into law? One of the political hurdles that affect the passing of the bill into law includes political interests just like other bills. Some politicians think that passing the bill will negatively affect their political carrier. As a result, they object the bill. They may object it in order to please their followers. If majority of them object, the bill will not become a law. In addition, it takes a very long process and time before a bill becomes a law. II. Benefits and cost associated with law An example of environmental law includes the Clean Air Act. The environmental laws come with fines and other regulations. The law is effective because it helps in reducing negative externalities in the environment. For instance, it helps in reducing negative health impacts of environmentally unfriendly substances. Through such laws, individuals have an obligation of using environmental resources while ensuring sustainability. Without such laws, there would be over consumption of some resources leading to unequal distribution. In addition, the law discourages individuals, especially manufacturers from degrading the environment. One of the disadvantages of environmental taxation law is that just like other laws; it requires the government to incur various costs. However, the government incurs fewer expenses compared to the benefits of implementing the law. The only major costs associate with this law includes the monitoring and subsidies costs. III. Financial feasibility Environmental law is financially feasible since it does not require huge expenses. Due to the benefits acquired from the implementation of the law, it is clear that law can pay for itself. The taxes and fines incurred by those charged with producing negative externalities can be used to fund the implementation process. Reduction of pollutants through this law helps in improving the health of citizens. This implies that medical expenses will reduce as work place productivity increase. Studies show that the implementation of the Clean Air law in the US has had a positive effect on the economy of the country. For instance, it has led to the introduction of cleaner technologies that has created market opportunities for many innovators. The taxes charged on those who pollute the environment can be used to provide subsidies and incentives. This implies that the government does not have to incur extra costs on the subsidies and incentives to encourage environmental friendly activities. c. Liberal or Conservative policy Liberal policies focus on achieving equality. They policies focus on solving the problems faced by the society instead of individual’s interests. On the contrary, conservative policies focus of individual responsibility. It encourages free markets. The polluter pay policy is a liberal policy because it focuses more on solving environmental problems instead of individuals needs. The policy is based on the notion that the government should regulate certain activities in order to prevent a problem from occurring. For instance, the aim of this policy is to prevent the tragedy of the commons. This implies that if people are given the freedom to peruse their personal interests, others will be negatively affected. The policy aims at maintain a balance in the society. Free market has contributed to environmental problems. As a result, the government has to intervene by solving the problem. The policy is based on the need for the government to reduce the problem. 3. Philosophy of the state a. How did Thomas Hobbes and John Locke differ in their visions of social contract? Hobbes and Locke believe that there should be governments and societies. However, their views on how the government and societies operate jointly differ. For instance, Hobbes’ theory is based on a relationship between the societies and the state that is built on a stable foundation. The government has more power compared to the society in this relationship. According to the philosopher, a perfect sovereign should have more political powers provided the power maintains order in a society. If the power maintains social order, it is the duty of the society to comply with it. This implies that the society should not fight against a sovereign power that bring peace and order even if the sovereign power fails in other areas such as economic system. On the contrary, Locke’s theory of social contracts holds that the society should comply with the rules and decisions of a governing sovereign provided the sovereign actions do not interfere with the basic boundaries and structures of the society and the government social contract. Unlike Hobbes theory, the society has a right to replace the government if it fails to carry out its duties as specified in the social contract. The social contract may vary depending on the needs of a society. I. Evidence of Leviathan The law shows evidence of Leviathan because its shows the government control over resources. It does not give the society the freedom to use the resources responsibly. b. Characteristics of the American social Contract: I. How the federalist papers influence the constitution ratification. The federalist papers influenced the constitution by introducing the citizen’s rights idea. This led to the amendment of individual rights by introducing the Bill of rights to the constitution. The paper argued for the ratification by convincing people that the constitution was necessary. It also supported the increase in the strength of the state government. II. Meaning of “if angels were to govern men” The phrase means that the government would be a perfect system. As such, it would not require any internal or external control. Since the government is not perfect, the control is necessary. This phrase is based on the concept Locke’s social contract theory which supports the control of the government by the society. III. How the government balances power The U.S government balances power by dividing it amongst its three parts that encompass legislative, executive, and judicial. All the branches operate dependently based on checks and balances system. This is done in order to ensure that all the branches have equal powers. Each branch has the power to monitor and control the powers of the other two. For instance, the legislative branch has specific checks that control the power of Executive branch. It may impeach the head of state and approve their appointments. Its checks over the judicial branch include prosecution of judges or supporting their appointments. The balance has been effective in ensuring that no branch has a full control of the government. IV. How does a bill become a law? The bill passes various stages before it becomes law. The first stage involves introduction of a new idea by representatives of the public after conducting a thorough research on it. The representatives then write it as a bill. The subsequent stage involves presenting it to sponsor by the representatives. The support of the bill by sponsors or other representatives leads to its proposition. The next step is the introduction of the bill by the representatives in the House of Representatives where it is given a number by a bill clerk. After this, the bill is sent to the committee by the speaker. The next stage involves reviewing and doing further research on the bill by the committee members. In the next stage, the bill is reported to the House floor after the committee approval. After this the bill is debated on by representatives in order to make changes if necessary. The next stage involves voting on the bill by representatives who then refer it to the senate to undergo the same steps as those in the House of Representatives. After this, the bill is passed to the president where he can decide to sign or refuse to sign it depending on his analysis. If he signs it then it becomes a law. V. Law implementation After the bill has become a law, it is implemented by a relevant executive branch agency. The agency is given the responsibility of writing administrative regulations which specifies how citizens are expected to obey the law. The regulations are them published after a notice has been issues by the agency. V. Affirmation of the law A law is affirmed at the Supreme Court when majority of the member approve it. This is after review at the state and federal judicial lower courts. If majority of the members at the Supreme Court objects it with reasonable argument then the law is not constitutionally affirmed. Read More