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Whatever economic system a country adopts, there is always a role for the government due to market failures. Can governments correct market failures? Illustrate your answers with example.
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PA302 (1) CHAN Sau-fung (S05012153) Whatever economic system a country adopts, there is always a role for the government due to market failures. Can governments correct market failures? Illustrate your answers with example. Part One Adam Smith who proclaimed the principle of the "invisible hand" that holds every individual is led, as if by an invisible hand, to achieve selfishly the best good for all. Smith saw harmony between private interest and public interest. In his view, any government interference with free competition is almost certain to be injurious in the economic world. He recognized that the virtues of the market mechanism are fully realized only when the checks and balances of perfect competition are present. Under the perfect competition and with no market failures, markets will squeeze as many useful goods and services out of the available resources as is possible. However, in reality, markets may fail to function well under numerous reasons....
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