Editing Government failure (section)

== Causes of government failure ==

=== Imperfect information ===
While a perfectly informed government might make an effort to reach the social equilibrium via quality, quantity, price or market structure regulation, it is difficult for the government to obtain necessary information (such as production costs) to make right decisions. This absence may then result in flawed quantity regulation when either too much or too little of the good or service is produced, subsequently creating either excess supply or excess demand. Imperfect information can come in many forms including; Uncertainty, Vagueness, Incompleteness and impreciseness. All creating flaws in government policy's and therefore in turn creating inefficiencies within the economy.<ref name=":13" />

=== Political interference === 
Political decisions may be made for short-term gain in response to interference by [[Advocacy group | special interest groups]]. Interference can lead to market failures.<ref name=":13">{{Cite journal |last=Magni |first=Stefano |title=Government Failure |journal=Handbook of Agricultural Economics}}</ref>

=== Political self-interest ===
The self-interests of a politician may undermine fair governance. This could look like an inappropriate allocation of funds or time. Public funds could be pushed to influence voters or time could be allocated to pursue personal inequalities instead of actual market failures.<ref name=":13" /> When politicians prioritize their self-interests over their constituents' needs, they risk alienating the very voters who supported them. This erosion of public trust not only diminishes their popularity but also undermines the effectiveness of governance. Ultimately, such self-serving behavior detracts from addressing critical societal issues, leaving citizens disillusioned and the country vulnerable.

=== Policy myopia ===
Another cause of the government failure, as many critics of government intervention claim, is that politicians tend to look for short term fixes with instant and visible results that do not have to last, to difficult economic problems rather than making thorough analysis for solving long-term solutions.<ref name=":0" /><ref name=":1">{{Cite web|url=https://voxukraine.org/en/political-myopia-causes-and-treatment/|title=Policy Myopia:causes and treatment|website=VOX Ukraine|language=en}}</ref>

=== Government intervention and evasion ===
It is believed that when a government tries to levy higher taxes on goods such as alcohol, also called [[Demerit good|de-merit goods]], it can lead to increase attempts of illegal activities as tax avoidance, tax evasion or development of [[grey market]]s, people could try to sell goods with no taxes. Also legalizing and taxing some drugs may arise in a quick expansion of the supply of drugs, which can lead to [[overconsumption]], which can mean a decrease in welfare.<ref name=":3" />

Government subsidies may lead to excess demand, which can be solved in two ways. Either the government chooses to meet all the demand, leading to higher consumption than socially efficient or if it knows the socially efficient amount, it can decide who gets how much of this quantity, a goal accomplished either through queuing and waiting-lists or through delegating the decisions to bureaucrats. Both solutions are inefficient, queueing first meets the demand of people at the front of the queue, which might not be the ones who need or want the product or service the most, but rather the luckiest or the ones with the right connections. Delegating the decisions to bureaucrats leads to problems with human factor and personal interests.<ref name=":3" />

=== High administrative and enforcement costs ===
Market failure can occur when the costs of the project outweigh the benefits. Costs that are included are; Tax collection through government departments, law enforcement and policy creation. All these costs allocations are quite broad however a lot of people are required to run a secure and efficient system. Cost in the system are classified as a credence-costs as the buyer cannot tell the quantity bought even after buying them. This means that Administration and enforcement costs for a project can be over or under assumed and therefore a market failure can therefore be dismissed easily or over analyzed (however benefits can also be credence-benefits).<ref name=":0">{{Cite web |url=https://www.economicsonline.co.uk/market_failures/government_failure.html/ |title=Government Failure |work= Economics Online |date=27 January 2020 }}</ref>

=== Regulatory capture ===
[[Regulatory capture]] is a problem which occurs whilst trying to implement regulations in selected industry. As government regulators usually have to meet with the industry representatives, they tend to form a personal relationship, which may lead them to be more sympathetic towards requirements and needs of given industry, subsequently making the regulations more favourable towards the producers rather than the society.<ref name=":3" />