Intervention the Pros and Cons Application Essay

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This leads directly to the issue of efficiency, which can be seen quite clearly from the above description to be harmed by government intervention in the short-term; by not allowing the market to find appropriate price point in the rapid manner of supply and demand curves, efficiency is eroded. This is where things get complicated, however, and where a true definition of terms must occur. The concept of efficiency itself is fairly straightforward, but in this context long-term and short-term efficiency must be distinguished. Though short-term efficiency is diminished by government intervention, this is not necessarily the case when major detrimental fluctuations over the long-term are controlled.

It is in the area of market stability that the theoretical quandary of the efficiency issue can be solved. Government regulation quite directly and purposefully, in almost all circumstances, increases market stabilization by controlling prices, providing subsidies, and in some instances controlling the levels of production or allowances of consumption (though rationing days have not been seen in this country for generations). This ensures that a regular and dependable but artificially (usually) limited supply of a particular item or class of items will be available, but does not allow for rapid growth or market fluctuations as reactions to shifting needs, demands, or supply chain issues.

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If properly conducted, some measure of government regulation in industry can create much greater efficiency in the long-term, because planning can occur on a more certain level, fewer risks will be incurred or even possible, and each expenditure can be made with greater security and a fuller understanding of the true value being created and traded within the market system as it would proceed.

There are, of course, many different levels of government regulation, and extreme levels of central planning such as those that occurred in the Soviet Union tend to lead to long-term inefficiencies and even market instabilities -- or worse, a very stable and near-empty market -- but a happy medium of planned economies with fluctuations for supply and demand within limits, and with government oversight of accounting practices, can lead to greater long-term efficiency and stability. The reduction of the growth rate is a necessary element of this framework, and is itself perhaps avoidable in the long-term, because recessions and "corrections" will tend to be less extreme and of lessened durations as well......

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