Introduction to Government failures - Essay Example

  Information failure is also another major factor that greatly contributes to governments failures. Because the government does not necessarily know enough details to enable it to make effective decisions on the best way to allocate scarce resources. Most of the economists believe in the efficient market hypothesis. That is, they assume that the market will always contain adequate information than any government or individual.The insinuation is that market values and market movements should be free from interference because individuals or governments cannot improve upon markets.

Moreover, taxes on goods as well as services can raise prices artificially and interfere the efficient operation of the market. Also, taxes on incomes can create a disincentive impact and discouraging individuals from working hard to achieve the set goals and objectives in a particular country.Fixing of prices is also another major factor that leads to government failures. The government can fix both minimum as well as maximum prices that can create distortions that contribute to various shortages.

Shortages may rise if the government of a particular country fixes the prices of various products below the market rate. Also, provision of free health care services by the government is another major factor that contributes to its failures. That is, there will be long waiting lists for treatment that might be outnumbering the efforts of health care providers and thus causing failure in the provision of this particular service.