SlideShare a Scribd company logo
1 of 18
THE CONCEPT OF STATE
INTERVENTION IN BUSINESS
INTRODUCTION
GOVERENMENT INTERVENTION-DEFINITION

Regulatory actions taken by a government in order to affect or interfere
with decisions made by individuals ,groups or organizations regarding
economic and social matters.


One of the features of modern business is the increasing involvement of
the government in business activities.
As of today ,there is no country in the world where the government of
the land does not interfere, in one form or the other ,in its economic
activities.
GOVERENMENT INVOVEMENT IN BUSINESS-
       HISTORICAL PERSPECTIVE

State intervention in business seems to be as old as business itself.

Even in days of laissez –faire,which apparently shunned state
intervention ,the governments role in the economy was almost incapable.

The laissez faire doctrine ignored the fact that industrialization had
always operated in an economy whose orderliness are guaranteed by the
government.

Entrepreneur always may have considered his property as belonging to
him by virtue of divine right, or as reward for his virtue ,or as the
outcome of a natural economic law, but it was only the government
which could guarantee him continued possession and use of his property.
As years went by .state intervention became a historical necessity particularly after the
industrial revolution of the late 18th and early 19th centuries.

The era of industrial revolution witnessed in humanity of man to man and brutalization
of human nature in those very countries, and in those very societies where the greatest
advances were being made in the fields of science ,technology and organizations.
Affluence and poverty ,distress and luxury ,and exploitation and helplessness became
so juxtaposed that the need of state intervention began to be felt much more than even
before.

Then came the first world war, which confirmed the inevitability of state intervention in
economic activities.
In 1944,when the world war was still in progress, the department of planning and
development was set up.

A new industrial policy was announced by the government and the viceroy ,lord
wavell,declared in 1945:”government has decided to take positive steps to encourage
and promote industrialization of the country to the fullest extent possible.”
Positive steps were taken such as industries like iron and steel, machine tools, heavy
chemicals and the like, which would lay the foundation for future economic
develpoment,were set up.
REASONS FOR STATE INTERVENTION

•Modern economy should be a planned economy.
 Government is the only agency which can plan and execute.

•Our constitution binds the government to take an active part
  in economic activities.

•What the people and the country need can only be
 understood and provided by government and not by
 privatization.

•State participation is necessary to lay a strong base for the
 future development of industry and commerce.
REASONS CONT….……..
• State intervention is necessary to eliminate poverty.
• Finally, the failure of market invites governments
  intervention in an economy.
  Market fails because of three reasons:
 1)Externalities
 2)Public goods
 3)Information problems
EXTERNALITIES-Externalities are costs or benefits that the
market transactor imposes on third parties without there consent.
The most frequently used example of a negative externality is
pollution, resulting from either the manufacturer or use of some
product ,which impose costs on the individuals who neither produce
nor consume the product in question.
 PUBLIC GOODS- Pure public goods such as defense ,law and
order and environmental protection cannot be provided by private
sector alone, because everybody shares their benefits automatically,
no one willing to pay them individually. But government can
provide them and impose their cost on tax payers.
INFORMATION PROBLEM- Imperfect information on the part of
either consumers or providers may make markets fail.
TYPES OF CONTROL




NATURE     APPROACH       SPREAD     EFFECT ON          EFFECT
                                     COMPETITION


FORMAL     COERCIVE      DIRECT     MAKE              PROMOTIONAL
                                    COMPETITION
                                    WORK


INFORMAL   INDUCIVE      INDIRECT   SET STANDARDS     REGULATORY
                                    FOR COMPETITION


                                    SUPPLEMENTARY
                                    COPMETITION
FORMAL AND INFORMAL CONTROLS
FORMAL CONTROLS: Formal controls are usually emanating from
legislation, for example: The FEMA,The Companies Act1956 and
Competition Act 2002.
INFORMAL CONTROLS: Informal controls refer to the controls which
various groups impose upon themselves out of need and custom.


COERCIVE AND INDUCIVE CONTROLS
COERCIVE CONTROLS : Coercive regulation require performance of
certain actions or refraining from others in order to avoid penalties.
For example: taxes must be paid or imprisonment may result.
INDUCIVE CONTROLS :Inducive controls hold out a promise of reward for
compliance with desired line of action.
For example: subsidies may be granted to stimulate certain activities.
DIRECT AND INDIRECT CONTROLS
DIRECT CONTROLS: When government fixes prices of certain
products or service it is a direct control
For example :The administered price policy of the government of India is
a direct control measure.
INDIRECT CONTROL: The variation of corporate income tax to
influence economic activity is an indirect control measure.

PROMOTIONAL AND REGULATORY CONTROLS
PROMOTIONAL CONTROLS: promotional measures are of a positive
in nature, and includes such activities as expansion of public sector
establishment and operation of development banks, encouragement to
small scale units, provision of incentives etc.
REGULATORY CONTROLS: Regulatory measures ensure orderly
development of industries with least wastage of resources.
A GOOD CONTROL SYSTEM

1)It must be democratic. This means that it must be exercised in the
interest of the governed as they see their interest.

2)It should know what it wants.

3)It must be efficient ,and at the same time it must not destroy the
efficiency of the thing it is regulating .

4)Control must be guided by experience or by wise experiment.

5)It must have a wider vision and canvas to develop. It must look beyond
the immediate effect of leading people to expect it in the future.

6)And lastly, the duties imposed must be simple enough to be
understood. ….
DISADVANTAGES OF INTERVENTION

1) One of the major areas in which the government intervenes is in the agricultural
sector of the economy. The government has three ways it can intervene and help its
producers. These ways include price policies, direct payments, and input policies.
Price policies have the largest effect on producers. Tariffs, quotas, and taxes are just
a few examples of price policies. While these policies bring revenue into the
government, in the end they hurt consumers. Each of these policies raise the prices
of both imported and native goods. They are designed to help stabilize prices and
give the native producers a chance to compete with foreign goods.

2) The use of taxes is one of the government‟s favourite ways to make its presence
known in the economy. While this method seems blatantly obvious, many of the
ways the government uses the money collected by taxation is not. Some of the
money it takes is used to fund other programs designed to “protect” consumers and
to “create” jobs. Because of the money taken away from the consumer through
taxes, there is less money movement in the economy. This money movement is what
creates jobs in the economy. “So, each person‟s money lost to taxes helps fail to
create their part of a job”.
3) The use of tariffs is another way that government intervenes in the business sector.
They help inefficient domestic producers by forcing consumers to pay unnecessarily
high prices for imported goods. The use of tariffs forces people to pay higher prices for
certain goods and thus resulting in less money the consumer has to spend on other
goods and services. This results in less employment in the industries that produce such
goods and services.

4) Small and big businesses are guilty of inviting government intervention in the free
market. They continually ask the government to step in and “protect” them. Small
businesses ask for less regulation on small business and more regulation on big
business. Fair-pricing laws are a way both large and small businesses keep the
government involved and hurt the consumer. These laws keep prices high and hurt
efficient competitors.
WHAT SHOULD BE THE FORM OF STATE
             INTERVENTION?

There are many ways in which intervention can take place – some
examples are given below:

Government Legislation and Regulation
Parliament can pass laws that for example prohibit the sale of cigarettes
to children, or ban smoking in the workplace.
The economy operates with a huge and growing amount of regulation.
The government appointed regulators who can impose price controls in
most of the main utilities such as telecommunications, electricity, gas and
rail transport.
Intervention designed to close the information gap

Often market failure results from consumers suffering from a lack of
information about the costs and benefits of the products available in the
market place. Government action can have a role in improving
information to help consumers and producers value the „true‟ cost and/or
benefit of a good or service. Examples might include:
•Compulsory labelling on cigarette packages with health warnings to
reduce smoking
•Improved nutritional information on foods to counter the risks of
growing obesity
•Anti speeding television advertising to reduce road accidents and
advertising campaigns to raise awareness of the risks of drink-driving
•Advertising health screening programmes / information campaigns on
the dangers of addiction
Public goods
Pure public goods such as defence ,law and order and environmental
protection cannot be provided by private sector alone. because
everybody shares their benefits automatically, no one willing to pay
them individually. But government can provide them and impose their
cost on tax payers.

Externalities
Good with positive externalities benefits, are worth more to society
than to any one consumer. Public health and education for example
,reduce infection rates, raise productivity etc.markets tend to
undersupply these goods ,and complementary funding or provision can
therefore improve efficiency,Simalarly markets ignore negative
externalities ,such as industrial pollution ,regulation to curb or clean up
the activity causing the pollution can improve social welfare.
CONCLUSION

It may be stated that the role of government in future must be redefined
but not ended.

The redefinition must be in the direction of improving quality of
intervention.

John Maynard Keynes once said. 'the important thing for government
is not to do things which individuals are doing already and to do them
little better or a little worse :but to do things which at present are not
done at all.”

What is not done till now is the improvement of the social sector
:primary education, health ,housing, nutrition and the like.

Let the government concentrate on these areas.
Ppt on business environment

More Related Content

What's hot

The role of the government in the economy
The role of the government in the economyThe role of the government in the economy
The role of the government in the economyMonique Trejeros
 
Political and legal environment
Political and legal environmentPolitical and legal environment
Political and legal environmentRohit Raina
 
Environmental scanning & Monitoring Techniques
Environmental scanning & Monitoring TechniquesEnvironmental scanning & Monitoring Techniques
Environmental scanning & Monitoring TechniquesRex Mannoor
 
Business and Legislation
Business and LegislationBusiness and Legislation
Business and Legislationtutor2u
 
corporate governance and role in strategic management
corporate governance and role in strategic managementcorporate governance and role in strategic management
corporate governance and role in strategic managementzeba khan
 
MNCs Features, significance, Role , Impact of MNCs on Indian economy.
 MNCs Features, significance, Role , Impact of MNCs on Indian economy. MNCs Features, significance, Role , Impact of MNCs on Indian economy.
MNCs Features, significance, Role , Impact of MNCs on Indian economy.mayank mulchandani
 
Monetary policy and fiscal policy
Monetary policy and fiscal policy Monetary policy and fiscal policy
Monetary policy and fiscal policy TintoTom2
 
Regional trade agreement
Regional trade agreementRegional trade agreement
Regional trade agreementStudsPlanet.com
 
Characteristics of market structures
Characteristics of market structuresCharacteristics of market structures
Characteristics of market structuresSandrea Butcher
 
PRESENTATION ON Economic system
PRESENTATION ON Economic systemPRESENTATION ON Economic system
PRESENTATION ON Economic systemmalay srivastava
 
Economic environment
Economic environmentEconomic environment
Economic environmentJenny Cortez
 
World Trade Organization- Brief Overview
World Trade Organization- Brief OverviewWorld Trade Organization- Brief Overview
World Trade Organization- Brief OverviewKashyap Shah
 
Tariff and non tariff barriers
Tariff and non tariff barriersTariff and non tariff barriers
Tariff and non tariff barriersJerin M James
 
Wto ppt
Wto pptWto ppt
Wto pptrk2its
 

What's hot (20)

The role of the government in the economy
The role of the government in the economyThe role of the government in the economy
The role of the government in the economy
 
Political and legal environment
Political and legal environmentPolitical and legal environment
Political and legal environment
 
Environmental scanning & Monitoring Techniques
Environmental scanning & Monitoring TechniquesEnvironmental scanning & Monitoring Techniques
Environmental scanning & Monitoring Techniques
 
Trips and trims
Trips and trimsTrips and trims
Trips and trims
 
Business and Legislation
Business and LegislationBusiness and Legislation
Business and Legislation
 
corporate governance and role in strategic management
corporate governance and role in strategic managementcorporate governance and role in strategic management
corporate governance and role in strategic management
 
Economic policies
Economic policiesEconomic policies
Economic policies
 
MNCs Features, significance, Role , Impact of MNCs on Indian economy.
 MNCs Features, significance, Role , Impact of MNCs on Indian economy. MNCs Features, significance, Role , Impact of MNCs on Indian economy.
MNCs Features, significance, Role , Impact of MNCs on Indian economy.
 
Monetary policy and fiscal policy
Monetary policy and fiscal policy Monetary policy and fiscal policy
Monetary policy and fiscal policy
 
Regional trade agreement
Regional trade agreementRegional trade agreement
Regional trade agreement
 
Industrial policy
Industrial policyIndustrial policy
Industrial policy
 
Economic environment
Economic environmentEconomic environment
Economic environment
 
Characteristics of market structures
Characteristics of market structuresCharacteristics of market structures
Characteristics of market structures
 
PRESENTATION ON Economic system
PRESENTATION ON Economic systemPRESENTATION ON Economic system
PRESENTATION ON Economic system
 
Economic environment
Economic environmentEconomic environment
Economic environment
 
World Trade Organization- Brief Overview
World Trade Organization- Brief OverviewWorld Trade Organization- Brief Overview
World Trade Organization- Brief Overview
 
Tariff and non tariff barriers
Tariff and non tariff barriersTariff and non tariff barriers
Tariff and non tariff barriers
 
Industrial policy
Industrial policyIndustrial policy
Industrial policy
 
Wto ppt
Wto pptWto ppt
Wto ppt
 
Growth of firms
Growth of firmsGrowth of firms
Growth of firms
 

Similar to Ppt on business environment

Rationale and extent of state intervention
Rationale and extent of state interventionRationale and extent of state intervention
Rationale and extent of state interventionNITISH SADOTRA
 
Welfare In India (Pratik Negi)
Welfare In India (Pratik Negi)Welfare In India (Pratik Negi)
Welfare In India (Pratik Negi)pratik negi
 
Government intervention
Government interventionGovernment intervention
Government interventionishwarijoshi
 
Eco 550 assignment 2 (2)
Eco 550 assignment 2 (2)Eco 550 assignment 2 (2)
Eco 550 assignment 2 (2)brooks7117
 
Eco 550 assignment 3
Eco 550 assignment 3Eco 550 assignment 3
Eco 550 assignment 3vgdhar27
 
Intro to Public finanace Managemnt.ppt
Intro to Public finanace Managemnt.pptIntro to Public finanace Managemnt.ppt
Intro to Public finanace Managemnt.pptmusanaseer1
 
The Theory Of Privatization
The Theory Of PrivatizationThe Theory Of Privatization
The Theory Of PrivatizationCOSKUN CAN AKTAN
 
Regulatory Public Policies: The Possibility And Impossibility Of Rational Reg...
Regulatory Public Policies: The Possibility And Impossibility Of Rational Reg...Regulatory Public Policies: The Possibility And Impossibility Of Rational Reg...
Regulatory Public Policies: The Possibility And Impossibility Of Rational Reg...COSKUN CAN AKTAN
 
Business Environment MBA
Business Environment MBABusiness Environment MBA
Business Environment MBAZubair Ahmad
 
Government Over Regulation Of The United States
Government Over Regulation Of The United StatesGovernment Over Regulation Of The United States
Government Over Regulation Of The United StatesRochelle Schear
 
Powerpoint presentation of_business_globalisation
Powerpoint presentation of_business_globalisationPowerpoint presentation of_business_globalisation
Powerpoint presentation of_business_globalisationshub-singhania
 
Uwi Government And Business Relations2005summary
Uwi  Government And Business Relations2005summaryUwi  Government And Business Relations2005summary
Uwi Government And Business Relations2005summarynutribait
 
02 key concepts in agric and food security sector 1 policy perspectives-paul ...
02 key concepts in agric and food security sector 1 policy perspectives-paul ...02 key concepts in agric and food security sector 1 policy perspectives-paul ...
02 key concepts in agric and food security sector 1 policy perspectives-paul ...pseng
 
Public Finance slides.pptx
Public Finance slides.pptxPublic Finance slides.pptx
Public Finance slides.pptxBedri Muktar
 
Roles of government in a market economy
Roles of government in a market economy Roles of government in a market economy
Roles of government in a market economy Hydraulic Hasheeb
 

Similar to Ppt on business environment (20)

Rationale and extent of state intervention
Rationale and extent of state interventionRationale and extent of state intervention
Rationale and extent of state intervention
 
Welfare In India (Pratik Negi)
Welfare In India (Pratik Negi)Welfare In India (Pratik Negi)
Welfare In India (Pratik Negi)
 
Government intervention
Government interventionGovernment intervention
Government intervention
 
As market failure
As market failureAs market failure
As market failure
 
Eco 550 assignment 2 (2)
Eco 550 assignment 2 (2)Eco 550 assignment 2 (2)
Eco 550 assignment 2 (2)
 
Eco 550 assignment 3
Eco 550 assignment 3Eco 550 assignment 3
Eco 550 assignment 3
 
Intro to Public finanace Managemnt.ppt
Intro to Public finanace Managemnt.pptIntro to Public finanace Managemnt.ppt
Intro to Public finanace Managemnt.ppt
 
The Theory Of Privatization
The Theory Of PrivatizationThe Theory Of Privatization
The Theory Of Privatization
 
Icab lectures chapter last
Icab lectures chapter lastIcab lectures chapter last
Icab lectures chapter last
 
Legal environment
Legal environmentLegal environment
Legal environment
 
Regulatory Public Policies: The Possibility And Impossibility Of Rational Reg...
Regulatory Public Policies: The Possibility And Impossibility Of Rational Reg...Regulatory Public Policies: The Possibility And Impossibility Of Rational Reg...
Regulatory Public Policies: The Possibility And Impossibility Of Rational Reg...
 
2
22
2
 
Business Environment MBA
Business Environment MBABusiness Environment MBA
Business Environment MBA
 
Government Over Regulation Of The United States
Government Over Regulation Of The United StatesGovernment Over Regulation Of The United States
Government Over Regulation Of The United States
 
Powerpoint presentation of_business_globalisation
Powerpoint presentation of_business_globalisationPowerpoint presentation of_business_globalisation
Powerpoint presentation of_business_globalisation
 
Uwi Government And Business Relations2005summary
Uwi  Government And Business Relations2005summaryUwi  Government And Business Relations2005summary
Uwi Government And Business Relations2005summary
 
02 key concepts in agric and food security sector 1 policy perspectives-paul ...
02 key concepts in agric and food security sector 1 policy perspectives-paul ...02 key concepts in agric and food security sector 1 policy perspectives-paul ...
02 key concepts in agric and food security sector 1 policy perspectives-paul ...
 
Boe 2
Boe 2Boe 2
Boe 2
 
Public Finance slides.pptx
Public Finance slides.pptxPublic Finance slides.pptx
Public Finance slides.pptx
 
Roles of government in a market economy
Roles of government in a market economy Roles of government in a market economy
Roles of government in a market economy
 

More from Jaswinder Singh

More from Jaswinder Singh (20)

Wto
WtoWto
Wto
 
Segmentation
SegmentationSegmentation
Segmentation
 
Ipr
IprIpr
Ipr
 
Intl monetary system ch. 10
Intl monetary system ch. 10Intl monetary system ch. 10
Intl monetary system ch. 10
 
Indian culture v
Indian culture vIndian culture v
Indian culture v
 
Ideology of different political parties
Ideology of different political partiesIdeology of different political parties
Ideology of different political parties
 
Human resource accounting
Human resource accountingHuman resource accounting
Human resource accounting
 
Hra
HraHra
Hra
 
Advertisement effectiveness.
Advertisement effectiveness.Advertisement effectiveness.
Advertisement effectiveness.
 
Balanced scorecard
Balanced scorecardBalanced scorecard
Balanced scorecard
 
Customer lifetime value
Customer lifetime valueCustomer lifetime value
Customer lifetime value
 
Customer profitability analysis crm ppt
Customer profitability analysis crm pptCustomer profitability analysis crm ppt
Customer profitability analysis crm ppt
 
Customer lifetime value ppttt
Customer lifetime value pptttCustomer lifetime value ppttt
Customer lifetime value ppttt
 
Intrrnl env, resources competancies
Intrrnl env, resources competanciesIntrrnl env, resources competancies
Intrrnl env, resources competancies
 
Formulation
FormulationFormulation
Formulation
 
Stratgy formultn and implemntatn
Stratgy formultn and implemntatnStratgy formultn and implemntatn
Stratgy formultn and implemntatn
 
Strategic intent
Strategic intentStrategic intent
Strategic intent
 
Balancedscorecard
BalancedscorecardBalancedscorecard
Balancedscorecard
 
International financial markets and institutions
International financial markets and institutionsInternational financial markets and institutions
International financial markets and institutions
 
Int bank and money mrkt
Int bank and money mrktInt bank and money mrkt
Int bank and money mrkt
 

Ppt on business environment

  • 1. THE CONCEPT OF STATE INTERVENTION IN BUSINESS
  • 2. INTRODUCTION GOVERENMENT INTERVENTION-DEFINITION Regulatory actions taken by a government in order to affect or interfere with decisions made by individuals ,groups or organizations regarding economic and social matters. One of the features of modern business is the increasing involvement of the government in business activities. As of today ,there is no country in the world where the government of the land does not interfere, in one form or the other ,in its economic activities.
  • 3. GOVERENMENT INVOVEMENT IN BUSINESS- HISTORICAL PERSPECTIVE State intervention in business seems to be as old as business itself. Even in days of laissez –faire,which apparently shunned state intervention ,the governments role in the economy was almost incapable. The laissez faire doctrine ignored the fact that industrialization had always operated in an economy whose orderliness are guaranteed by the government. Entrepreneur always may have considered his property as belonging to him by virtue of divine right, or as reward for his virtue ,or as the outcome of a natural economic law, but it was only the government which could guarantee him continued possession and use of his property.
  • 4. As years went by .state intervention became a historical necessity particularly after the industrial revolution of the late 18th and early 19th centuries. The era of industrial revolution witnessed in humanity of man to man and brutalization of human nature in those very countries, and in those very societies where the greatest advances were being made in the fields of science ,technology and organizations. Affluence and poverty ,distress and luxury ,and exploitation and helplessness became so juxtaposed that the need of state intervention began to be felt much more than even before. Then came the first world war, which confirmed the inevitability of state intervention in economic activities. In 1944,when the world war was still in progress, the department of planning and development was set up. A new industrial policy was announced by the government and the viceroy ,lord wavell,declared in 1945:”government has decided to take positive steps to encourage and promote industrialization of the country to the fullest extent possible.” Positive steps were taken such as industries like iron and steel, machine tools, heavy chemicals and the like, which would lay the foundation for future economic develpoment,were set up.
  • 5. REASONS FOR STATE INTERVENTION •Modern economy should be a planned economy. Government is the only agency which can plan and execute. •Our constitution binds the government to take an active part in economic activities. •What the people and the country need can only be understood and provided by government and not by privatization. •State participation is necessary to lay a strong base for the future development of industry and commerce.
  • 6. REASONS CONT….…….. • State intervention is necessary to eliminate poverty. • Finally, the failure of market invites governments intervention in an economy. Market fails because of three reasons: 1)Externalities 2)Public goods 3)Information problems
  • 7. EXTERNALITIES-Externalities are costs or benefits that the market transactor imposes on third parties without there consent. The most frequently used example of a negative externality is pollution, resulting from either the manufacturer or use of some product ,which impose costs on the individuals who neither produce nor consume the product in question. PUBLIC GOODS- Pure public goods such as defense ,law and order and environmental protection cannot be provided by private sector alone, because everybody shares their benefits automatically, no one willing to pay them individually. But government can provide them and impose their cost on tax payers. INFORMATION PROBLEM- Imperfect information on the part of either consumers or providers may make markets fail.
  • 8. TYPES OF CONTROL NATURE APPROACH SPREAD EFFECT ON EFFECT COMPETITION FORMAL COERCIVE DIRECT MAKE PROMOTIONAL COMPETITION WORK INFORMAL INDUCIVE INDIRECT SET STANDARDS REGULATORY FOR COMPETITION SUPPLEMENTARY COPMETITION
  • 9. FORMAL AND INFORMAL CONTROLS FORMAL CONTROLS: Formal controls are usually emanating from legislation, for example: The FEMA,The Companies Act1956 and Competition Act 2002. INFORMAL CONTROLS: Informal controls refer to the controls which various groups impose upon themselves out of need and custom. COERCIVE AND INDUCIVE CONTROLS COERCIVE CONTROLS : Coercive regulation require performance of certain actions or refraining from others in order to avoid penalties. For example: taxes must be paid or imprisonment may result. INDUCIVE CONTROLS :Inducive controls hold out a promise of reward for compliance with desired line of action. For example: subsidies may be granted to stimulate certain activities.
  • 10. DIRECT AND INDIRECT CONTROLS DIRECT CONTROLS: When government fixes prices of certain products or service it is a direct control For example :The administered price policy of the government of India is a direct control measure. INDIRECT CONTROL: The variation of corporate income tax to influence economic activity is an indirect control measure. PROMOTIONAL AND REGULATORY CONTROLS PROMOTIONAL CONTROLS: promotional measures are of a positive in nature, and includes such activities as expansion of public sector establishment and operation of development banks, encouragement to small scale units, provision of incentives etc. REGULATORY CONTROLS: Regulatory measures ensure orderly development of industries with least wastage of resources.
  • 11. A GOOD CONTROL SYSTEM 1)It must be democratic. This means that it must be exercised in the interest of the governed as they see their interest. 2)It should know what it wants. 3)It must be efficient ,and at the same time it must not destroy the efficiency of the thing it is regulating . 4)Control must be guided by experience or by wise experiment. 5)It must have a wider vision and canvas to develop. It must look beyond the immediate effect of leading people to expect it in the future. 6)And lastly, the duties imposed must be simple enough to be understood. ….
  • 12. DISADVANTAGES OF INTERVENTION 1) One of the major areas in which the government intervenes is in the agricultural sector of the economy. The government has three ways it can intervene and help its producers. These ways include price policies, direct payments, and input policies. Price policies have the largest effect on producers. Tariffs, quotas, and taxes are just a few examples of price policies. While these policies bring revenue into the government, in the end they hurt consumers. Each of these policies raise the prices of both imported and native goods. They are designed to help stabilize prices and give the native producers a chance to compete with foreign goods. 2) The use of taxes is one of the government‟s favourite ways to make its presence known in the economy. While this method seems blatantly obvious, many of the ways the government uses the money collected by taxation is not. Some of the money it takes is used to fund other programs designed to “protect” consumers and to “create” jobs. Because of the money taken away from the consumer through taxes, there is less money movement in the economy. This money movement is what creates jobs in the economy. “So, each person‟s money lost to taxes helps fail to create their part of a job”.
  • 13. 3) The use of tariffs is another way that government intervenes in the business sector. They help inefficient domestic producers by forcing consumers to pay unnecessarily high prices for imported goods. The use of tariffs forces people to pay higher prices for certain goods and thus resulting in less money the consumer has to spend on other goods and services. This results in less employment in the industries that produce such goods and services. 4) Small and big businesses are guilty of inviting government intervention in the free market. They continually ask the government to step in and “protect” them. Small businesses ask for less regulation on small business and more regulation on big business. Fair-pricing laws are a way both large and small businesses keep the government involved and hurt the consumer. These laws keep prices high and hurt efficient competitors.
  • 14. WHAT SHOULD BE THE FORM OF STATE INTERVENTION? There are many ways in which intervention can take place – some examples are given below: Government Legislation and Regulation Parliament can pass laws that for example prohibit the sale of cigarettes to children, or ban smoking in the workplace. The economy operates with a huge and growing amount of regulation. The government appointed regulators who can impose price controls in most of the main utilities such as telecommunications, electricity, gas and rail transport.
  • 15. Intervention designed to close the information gap Often market failure results from consumers suffering from a lack of information about the costs and benefits of the products available in the market place. Government action can have a role in improving information to help consumers and producers value the „true‟ cost and/or benefit of a good or service. Examples might include: •Compulsory labelling on cigarette packages with health warnings to reduce smoking •Improved nutritional information on foods to counter the risks of growing obesity •Anti speeding television advertising to reduce road accidents and advertising campaigns to raise awareness of the risks of drink-driving •Advertising health screening programmes / information campaigns on the dangers of addiction
  • 16. Public goods Pure public goods such as defence ,law and order and environmental protection cannot be provided by private sector alone. because everybody shares their benefits automatically, no one willing to pay them individually. But government can provide them and impose their cost on tax payers. Externalities Good with positive externalities benefits, are worth more to society than to any one consumer. Public health and education for example ,reduce infection rates, raise productivity etc.markets tend to undersupply these goods ,and complementary funding or provision can therefore improve efficiency,Simalarly markets ignore negative externalities ,such as industrial pollution ,regulation to curb or clean up the activity causing the pollution can improve social welfare.
  • 17. CONCLUSION It may be stated that the role of government in future must be redefined but not ended. The redefinition must be in the direction of improving quality of intervention. John Maynard Keynes once said. 'the important thing for government is not to do things which individuals are doing already and to do them little better or a little worse :but to do things which at present are not done at all.” What is not done till now is the improvement of the social sector :primary education, health ,housing, nutrition and the like. Let the government concentrate on these areas.