Effectiveness of government intervention

• May use particular method of intervention to because of their own vested interests
• e.g. a political party may use a particular method to gain popularity

Many interventions work through the price mechanism by changing the relative price/ relative costs of day to day decisons

• raisng the price of fuel to curb consumption- fuel becomes more expensive , which therefore may lead to consumers to reduce spending on fuel
• Offering a subsidy to bio fuel producers- reduces costs of production
• Using tariffs to change prices of imports into domestic economy

• Economics= social science
• Efffects of intervention can't be calibrated/ forecasted with great accuray as people's behaviour is subject to change

One single method of intervention alone is unlikely to provide a solution ti deep and rooted economic and social problems.

Governement should have a variety of options whcih they can use alongside each other

Government intervention may not be neccessary at all times

Free market forces can potentially find profitable soltions on their own. For example through innovation and invention

Government intervention does not always work in the way in which was intended or predicted to.

Policy used may in turn make the problem worse or perhaps solve the problem but then create a new issue which needs to be resolved.

An example is maximum price for renting accommodation. A government may respond to public pressure and impose maximum rent levels for accommodation in London. But, a maximum price which lowers the price could lead to less incentive for landlords to supply accommodation. Therefore, there is less supply and more people struggle to get accommodation.

http://www.economicshelp.org/blog/2381/economics/law-of-unintended-consequences/