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The Role of Government Debate

The debate on the role of government is a difference of opinion on how involved the government should be in the nation's affairs, usually with respect to the economy. On one side, the laissez-faire argument, believes that the government should take a back seat and take as little action as possible. On the other hand, the interventionist argument says that the government needs to actively correct the inefficiencies that will arise in the nation if they did nothing. In laissez-faire forms of government, the government does not do absolutely nothing, but is still required to do things such as protecting property rights. A laissez-faire government relies on the assumption that within competitive markets, forces are self-regulating and will return the market to optimal conditions. So, any external perturbation via the government can only make things worse.

On the other hand, government interventionist policies involve the government entering into the market and making policies that shift the way the market is operating to provide a better outcome. There are generally two categories of government policies: economic regulation and social regulation. Economic regulation tries to control the prices of goods and services. The government preventing a merger that would result in a monopoly (leaving one firm with too much market power) would be an example of economic regulation. Social regulation seeks to control harmful behaviour and make social costs of private actions more salient. Climate change and pollution reduction policies are examples of these social regulations. Throughout the years governments such as the United States' have switched back and forth between laissez-faire and interventionist policies.