Public good provision is an example of market failure, which requires government intervention. This happens in the private market, which deals with the provision of public good such as health care. When the health care is left in the control of private markets, its price system does not offer equitable price and quantity of output. This is so because the public will be required to supplement their consumption with purchases from the private market, which will take advantage of the situation. The private market, which deals with health, matters end up overcharging without considering the issue of quality and income inequality. Mutually negative externalities may occur when the people with different income distribution go to the public good in the private market (Kim and Grusky 475).
In this case, the government is supposed to provide a universal health care, to protect public from private markets, which aim at maximizing profit at the expense of public good. This will help in correcting unequal distribution of income and improve efficiency. The government can also intervene during a market failure by reducing public debts via taxes, public purchases and grants. This will increase the purchasing power of people and promote the provision of equitable price and output.
Similarly, the government can intervene by formulating and maintaining rules in the economy, which regulate the private market and prevent them from exploiting public. The government policy will be involved in setting out rules that affect policy goals (Pashardes 866). These rules will help to limit the extent to which private market may control the market. Although government intervention is meant to protect the interest of the public, there are limits, which can be caused by pressure from interest groups. This pressure can prevent the government from acting purely in the interests of the public.
Works Cited
Kim, Weeden, and Grusky David. "Inequality and Market Failure." American Behavioral Scientist 58.3 (2013): 473-491.
Pashardes, Panos. "Consumer welfare from publicly supplemented private goods: age and income effects on demand for health care." Empirical Economics 41.3 (2011): 865–885.
