views and actions of the private sector are fundamentally different from that
of the public sector and would not otherwise act in ways that decrease profits.
Profit and the differing ideals drive companies to engage in many industries,
and for others, there is little to no engagement. Companies have shown that responsibility
and respect for the environment are a distant second to making money.
Government’s role in market failures should be to help and support incomplete
markets, protect and preserve the environment through government regulation,
and regulate companies and financial institutions.
The school system is a market failure because
of the amount of allocation of money and resources going to already affluent
schools, and the negative externalities. Public education is not purely a
public good because it is rivalrous, has a cost, and excludes families to an
equitable education. Most families are limited to send their children to
schools in the area. If that school happens to be in a poor area, that is where
their children are going because of the location. If they want to send their
child to a different school, capacity may not allow them to attend that school.
Douglas N. Harris, a professor of Economics, summarizes this by saying, “since
school buildings are only so large, most schools do not seek to expand, the
better schools will not necessarily expand to meet high demand. This means the
market will allow low-performing schools to continue operating” (Harris, 2017).
is also a market failure because of the negative externalities that are a
result of a mismanaged and unequitable system. The negative externalities of
schools that lack the funding and resources include but are not limited to
increased crime and welfare in the community. A study that was conducted and published in
2011, investigated how education effected crime. The authors of the article, “Stephen
Machin, Olivier Marie and Sun?ica Vuji? , reported that empirical findings
show that education reduces property crime and that improved education can
therefore generate social benefits” (Machin, S., Marie, O., & Vuji?, S.,
2011). This study was conducted in Wales and England, but never the less has
implications for the U.S. educational system. Too many resources are being
allocated to the already wealthy schools, leaving the poor schools with very
little resources and money. Government should help and prop up schools that
lack resources and a supporting environment through subsidized programs that
support learning and improve many impoverished schools.
made by companies over the past forty to fifty years have contributed to the
degradation of the environment and ultimately to people who inhabit it. A
current environmental problem that is faced today are deadzones. According to
the National Oceanic and Atmospheric Administration, a deadzone is “an area of
low oxygen that can kill fish and marine life” (Gulf of Mexico, 2017). The
cause of this type of pollution is due to chemicals and pesticides that is used
in farming and agriculture, which run off into the rivers and is released into
the Gulf of Mexico (2017). This not only effects the wildlife, but also the
people who rely on it for income and a food source. The lack of sea life will
likely cause seafood prices to increase because of the decrease in supply. The
government should levy taxes and promote innovation to decrease the use of
harmful pesticides and chemicals.
the 2008 recession, too much money was invested into mortgaged back securities
that were subprime. It was the culmination of lack of government regulation and
greed. The causes are more complex than that, but they were contributing
factors that led to the recession in 2008. Lack of regulation of the credit
rating agencies gave subprime mortgage backed securities higher ratings than
what they actually should have been rated (Kumar, 2016). Why they would rate
high risk mortgage backed securities is up for debate, but many speculate that
“the issuer-pays revenue model creates incentives for the ratings agencies to
assign inflated ratings…” (ALP, 2013). Too many mortgages were being approved,
despite the amount of people with insufficient incomes to buy homes. This as
well as many other causes, resulted in many people losing their jobs, homes
were foreclosed, food and gas prices increased, and many other economies around
the world were negatively affected. The government needs to regulate and make
more transparent company and financial institution’s transactions.
government needs to promote and support a more equitable education system,
place regulations on companies to reduce the damage done to the environment,
and it needs to regulate the companies and financial institutions. The current
education system has created negative externalities such as crime. This has a
spillover effect in which crime effects the community as a whole. The deadzone
in the Gulf of Mexico as well as many other environmental issues are negative
externalities or byproducts of companies and the citizens of the world. The
effect is felt in the short term, through rising prices of for example seafood.
The financial crisis in 2008 showed what happens when there is a lack of
government regulation and transparency in the private sector. These are the roles the government should
play in correcting market failures. In doing so, they can promote responsible
actions that have a positive impact on the community and environment.