Economics of Reforms and Regulations

Economic Role of the Government

In this module, you will be introduced to a few known fundamentals of welfare economics, delineating efficient outcomes of a “perfectly competitive” market, albeit under strong assumptions. Through a simple market experiment, you will be able to learn that competitive equilibrium is a good predictor of price and quantity even if we assume weaker conditions. This module will answer some of the obvious questions such as why governments intervene in markets, and what are some of the reasonable grounds for governments to intervene in markets. To answer these questions, this module examines real markets that are “imperfect” and therefore unable to produce, consume, or distribute in accordance with what is best for everyone. Lastly, this module characterizes some of the dimensions of the debate on state-market dichotomy, both in the context of free-market advocacy and in the light of historical evidence of government failures across the world. The need for developing a mutually supportive system for market and non-market institutions is emphasized upon.