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Noneconomic Rationales for Government Intervention

Noneconomic Rationales for Government Intervention

Introduction

There are   variety of physical factors and   social (whether  Political, legal, behavioral, economic and geographical)   why governments decide   take measures designed to encourage or restrict international trade flows. These measures affect the competitive environment in which businesses operate, either by strengthening and hindering their ability to compete internationally (Pigou,2013).

Economic arguments

 Inside   of the   economic arguments for government intervention are:

   Unemployment

· Infant industry protection

·  Promoting industrialization

· Position improved the comparative   to   Sites (Poynter,2012).

Fighting Unemployment

 The unemployed are the group most  effective pressure, as they have the time or motivation to protest in public, contact government representatives and confront organizations. Displaced workers are generally less able to find another job with comparable pay (Towse,2011).

The infant industry argument

 Assumes that initial production costs for small-scale industry in a particular country may be too high, and this makes production uncompetitive on world markets. The final competition is not the result of persistence, but the consequence of the efficiency gains they need time to crystallize. Therefore the host government must   protect an infant industry during the   long as necessary (Poynter,2012).

Countries seeking protection to promote industrialization because that kind of production

 Produce higher growth than agriculture, Attracting investment funds, diversifies the economy, generates income commodities, reduces imports and encourage exports, contribute to the construction process national, When a country shifts from agriculture to industry generates three problems, increases the demand for social and political services in cities, production increases if the marginal productivity of agricultural workers is very low and the possibilities of developing the agricultural sector they may go unnoticed (Pigou,2013).

Economic relations with other countries

All countries monitor their absolute economic welfare and compare their performance with that of other countries. As governments impose trade restrictions to improve their trading positions relative (Poynter,2012).

Non Economic Arguments for Government Intervention

Some of the most essential reasons through which governments justify interventions are:

· Protect key industries.

· Prevent shipments to hostile countries.

· Preserve or expand areas of influence.

·  Preserving national identity (Towse,2011).

Protect Key Industries

Governments apply trade restrictions to protect key industries in the nation in peacetime. So you do not have to rely on foreign sources of supply in wartime. This is known as the argument of the essential industry. For example, the US government subsidizes domestic production of silicon for computer chips producers are not dependent on foreign suppliers (Poynter,2012).

Preserve Or Expand Areas Of Influence

There are many examples of government trade-related measures that were designed to support spheres of influence.Governments grant aid and loans to countries with which establish a political alliance or vote a certain way in international bodies (Poynter,2012).

Preserving National Identity.

Countries maintain their unity, in part, through inclusive sense of identity that distinguishes its citizens from those of other nations. To support this collective identity countries restrict foreign producers and services in certain sectors. For many years Japan, South Korea and China maintained an almost total ban   imports of rice, mainly because rice cultivation   has been a force for historical cohesion in each of these countries. But the pressures of the WTO have forced them to compromise on this (Swinburn et al,2011).

There are several studies that you & oacuterico level with some evidence emp & iacuterica (Chudnosky and Lopez, 1996) discuss the issue of state intervention. Within the current neoliberal proposes that the state should only act where this market failure. But, while recognizing the existence of market failures or externalities, questions or doubts the extent of government intervention. It is argued that the state can not always remedy the flaws and also be alert to the possibility that negative externalities arise or new market failures, or that private agents neutralize the actions of the State  (Towse,2011).

There are other approaches that criticizing the validity of the assumptions and prescriptive capacity of the theoretical perspective that gives priority to the importance of the free play of market forces in developing countries indicate the need for the state confronts certain commitments in order to contribute to the building of an internationally competitive economy (Swinburn et al,2011).

Evidence that provide some latecomers who have had successful development policies, raises the need for a degree of state intervention in the design of policies to improve efficiency and stimulate growth (Towse,2011).But even if the relevance of this type of experience is accepted, the question immediately arises whether any state apparatus, organizational structure or bureaucratic hierarchy is able to adopt a set of desirable and socially efficient active policies, and if, at the operational level, officials strictly observe the guidelines agreed policy, or if instead introduce biases in the practical implementation of measures and policy instruments based on their own interests or political or ideological motivations (Poynter,2012).

On the one hand, a number of theoretical approaches that emphasize the problem of information. ( These may distinguish two aspects: the first involves the dynamic and fragmented nature of the information, which complicates the decision-making process centrally and the second contemplates the existence of information asymmetry, modeled on the concept agent-principal (Swinburn et al,2011).For example, there may be information asymmetry between those who design policy(policy makers) and lower officials or also between the state and private actors to affect policy, with consequent complications for the design and implementation of coherent and effective policies (Towse,2011).

The presence of information as a dynamic, costly and imperfect process leads to that agents have to act under uncertainty, with severe consequences for market functioning and decision-making. Knight, in his famous book Risk, Uncertainty and Profit (1921) argues that:

"Imperfect information should reflect more than risk, and called uncertainty. In this case, the events (individual or collective actions) should be unpredictable. However, to accept uncertainty as a source of profit, the explanation is affected the existence of firms if you think that companies exist to make profits. If perfect information obviates the problems of internal organization (as in the case of neoclassical perfectly competitive firm), then the existence of organizational problems is at least partially in the presence of a costly and imperfect knowledge. " (Swinburn et al,2011).

Thus, an answer to the question of Coase on why organizations exist -firmas- becomes relevant in terms of non-probabilistic concept of uncertainty (Pigou,2013).Precisely in situations characterized by structural uncertainty, where it is impossible to formulate contingent contracts, the market is replaced by various organizations, this being the most appropriate mechanism for the allocation and resource location. In this sense, the institutional school created by Akerlof and Stiglitz sees the origin of the institutions in the presence of various types of information problems such as incomplete markets, asymmetric information, moral hazard, etc. (Poynter,2012).

The main aspect demonstrated by the fundamental theorem of welfare economics is that in a variety of situations where information becomes imperfect and costly, as often happens in reality government intervention could improve the collective welfare if makers policy have the right incentives and implement the right policies. The fact that markets with costly and incomplete information not work perfectly is a fundamental justification for the existence of possible government actions (Towse,2011).

In this regard, under an institutionalist perspective, argues the existence of political economy constraints arising from market failures and failures of state intervention that hinder the efficiency of public policies (Swinburn et al,2011).

 The theory of public Pickings notes that bureaucrats and politicians, to make decisions about the collective welfare, seek immediate increase more than those who claim to represent the best benefit decisions depend on the interpretation by the bureaucrat in the interests of the community, an interpretation that does not necessarily coincide with the actual collective will (Swinburn et al,2011).

Additionally, the existence of search agents income (rent seekers) who profit from the income generated by the diversion of public resources, reproduce opportunistic and selfish behavior in favor of the interests of specific groups and against the collective interests of the community as a whole.The influence of private agents through lobbying efforts -Iobbying- and interference from state officials for their own benefit and others, generate serious flaws in the government's action, which threaten the rigorous implementation of socially desirable policies (Poynter,2012).

References

Gutmann, A. (2011). On risk and disaster: Lessons from Hurricane Katrina. R. J. Daniels, D. F. Kettl, & H. Kunreuther (Eds.). University of Pennsylvania Press.

Pigou, A. C. (2013). The economics of welfare. Palgrave Macmillan.

Poynter, T. A. (2012). Multinational Enterprises and Government Intervention (RLE International Business) (Vol. 32). Routledge.

Swinburn, B. A., Sacks, G., Hall, K. D., McPherson, K., Finegood, D. T., Moodie, M. L., & Gortmaker, S. L. (2011). The global obesity pandemic: shaped by global drivers and local environments. The Lancet, 378(9793), 804-814.

Towse, R. (Ed.). (2011). A handbook of cultural economics. Edward Elgar Publishing.