Market failure is a concept in economics which indicates an inefficient allocation of goods and services. One of the common examples which point to market failure is income inequality. In a free market economy, it is assumed that every individual has an equal chance to succeed; however, due to inefficient allocation of resources, this may not always be the situation. In order to counter market failure, the government may be forced to intervene and regulate the market, with the aim of achieving an equitable distribution of resources.
The U.S government has come up with several intervention measures, which focus on transferring income from the wealthy and the rich, to the poor people. These measures include unemployment benefits, welfare programs, Medicaid and minimum wage. These measures are aimed at supporting economic development within the poor households, and uplifting their standards of living. Nonetheless, some politicians and some economists are opposed to government intervention.
The alternative to government intervention would be to let the poor households work hard and get rich. Proponents of this move argue that this would contribute to the economic growth of the country as a whole. However, this may lead to social and economic disruptions since the middle and the lower income groups would not contribute adequately to the nation’s output.
Through intervention measures, the government has raised taxes on the rich, and placed a heavy burden on employers who have an obligation to take care of the welfare of their employees. Attempts by the government to raise taxes on the rich and small businesses has faced resistance from various quarters, with the main argument being that it is not a good incentive for business.
Works Cited
Page, Benjamin I. and James R. Simmons. What Government Can Do: Dealing with Poverty and Inequality. Chicago, IL: University of Chicago Press, 2002. Print.
Tanzi, Vito and Ke-Young Chu. Income Distribution and High-Quality Growth. Cambridge, MA: MIT Press, 1998. Print.
