Answer to Question #208007 in Economics for Denzel

Question

Why do market failures have to be fixed by the government

Answer 1

The market is a voluntary exchange system. It is necessary to ensure this voluntariness, that is, to create a legal framework that protects economic agents from violence (deception, theft, extortion). The state is entrusted with a serious task - the protection of the rights of producers and consumers operating in the market. First of all, the protection of property rights must be ensured. An economic agent who is not sure of the inviolability of his property will fear its alienation and the restriction of his right to it, and will not be able to function as an effective owner. Therefore, it is necessary to have legislation to ensure ownership. State opposition to the unlimited power of monopolies plays an important role in legal support. In economically developed countries, antitrust laws have been developed to restrict the element of unhealthy and unfair competition.

Consumer protection legislation is of great importance. Serious sanctions are taken against the sale of low-quality goods, false information about the activities of firms, etc. The state develops laws regarding the protection of intellectual property, banking, and other areas of economic life. Finally, criminal legislation against theft, violence, murder creates a more stable situation in the country and also improves the functioning of the market.