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  1. phorntita's Avatar
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    #1

    Public Sector in a mixed economy

    << Joseph Stiglitz discusses the role of the government or the public sector in a "mixed economy". In a mixed economy, many if not most economic activities are undertaken by individual actors and private firms, but government plays an important role, either by its own economic enterprises or by influencing private activity by fiscal,monetary,and regulatory policies. In a primarily capitalist system, the usual rationale for government intervention in economic affairs is to correct "market failures." But the public sector can suffer from "goverment failures" as well . What criteria should be used to determine the relative weight of government or the market in the allocation of scarce resources ? According to these criteria, what would be the advantages and disadvantages of each approach? >>

    When the word "market" there referred to "private sector"

    **Could anyone tell me whether I can call "private sector market" for the word "market" there?
    Phorntita
    Last edited by phorntita; 22-Dec-2010 at 14:35. Reason: give more detail

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    #2

    Re: Public Sector in a mixed economy

    The market includes both private and public (gov't) entities. Microsoft buys pens and paper, so does the Department of Justice. Both types of entities are in the market for office supplies.

    The question here is to what extent the gov't interferes in the natural operations of the free market.

    For example, if there is a scarce resource, like oil, the gov't may use its power to reserve a particular amount of oil for its own use. This makes the remaining oil even more scarce for private users who obtain it in the free market.

  2. phorntita's Avatar
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    #3

    Re: Public Sector in a mixed economy

    Quote Originally Posted by SoothingDave View Post
    The market includes both private and public (gov't) entities. Microsoft buys pens and paper, so does the Department of Justice. Both types of entities are in the market for office supplies.

    The question here is to what extent the gov't interferes in the natural operations of the free market.

    For example, if there is a scarce resource, like oil, the gov't may use its power to reserve a particular amount of oil for its own use. This makes the remaining oil even more scarce for private users who obtain it in the free market.
    >>

    In a primarily capitalist system, the usual rationale for government intervention in economic affairs is to correct "market failures." But the public sector can suffer from "goverment failures" as well . What criteria should be used to determine the relative weight of government or the market in the allocation of scarce resources ? According to these criteria, what would be the advantages and disadvantages of each approach? >>

    **There are 2 places of the word "market", I wonder whether it referred to the same "market".

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    #4

    Re: Public Sector in a mixed economy

    Yes. The market is the market. How free it is is up to the gov't. (Or governments.)

  3. phorntita's Avatar
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    #5

    Re: Public Sector in a mixed economy

    Quote Originally Posted by SoothingDave View Post
    Yes. The market is the market. How free it is is up to the gov't. (Or governments.)
    -Please help me out with the translation for the word "market" . Are there any modifier for the 2nd market to make it different from the 1st market.
    - I don't get what it meant when government help correct " market failure" and then we'll find the appropriate criteria to use to determine the relative weight of government or market in the allocation of scarce resources again?
    - What is relative weight, anyway?

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    #6

    Re: Public Sector in a mixed economy

    Quote Originally Posted by phorntita View Post
    -Please help me out with the translation for the word "market" . Are there any modifier for the 2nd market to make it different from the 1st market.
    - I don't get what it meant when government help correct " market failure" and then we'll find the appropriate criteria to use to determine the relative weight of government or market in the allocation of scarce resources again?
    - What is relative weight, anyway?
    The market is the market. The two words refer to the same thing.

    When the market does not function the way the politicians want it to, they call it a "market failure" and then intervene. This usually leads to the market reacting in a way that the politicians did not expect, which leads to further intervention, etc.

    For instance, in the USA, politicians were not happy that banks did not lend money for homes to people with poor credit, so they forced banks to do so. This led to the banks failing when the people could not pay for the loans they had been given.

    This is what the politicians call a "market failure." So they spent taxpayer money to bail out the banks so they did not go bankrupt. This is the government "correcting."

    Relative weight means the weight of one aspect versus the other.

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