Economic interventionism
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Economic interventionism is an action taken by a government in a market economy or market-oriented mixed economy, beyond the basic regulation of fraud and enforcement of contracts, in an effort to affect its own economy.[citation needed] Economic intervention can be aimed at a variety of political or economic objectives, such as promoting economic growth, increasing employment, raising wages, raising or reducing prices, promoting equality, managing the money supply and interest rates, increasing profits, or addressing market failures. The term economic intervention assumes the state and economy are inherently separate from each other, and therefore applies to capitalist market or mixed economies where government action would make an "intervention" (although this does not apply to state-owned enterprises that operate in the market).
Economic planning in market economies is sometimes considered to be a form of intervention when it intervenes in the setting of prices and the distribution of goods determined by the market.
Economic planning tends to be associated with the political left, while economic interventionism is often associated with centrism, which believes that certain market outcomes are undesirable or ineffective and ought to be mitigated. Both Economic interventionism and planning is sometimes practiced by national conservative, fascist, economic nationalist and right-wing parties with the thinking that the free market can damage national traditions, social order, or the authority of the state itself.
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[edit] Types of interventions
Economic interventions common in contemporary governments include[citation needed] targeted taxes, targeted tax credits, minimum wage legislation, union shop rules, contracting preferences, direct subsidies to certain classes of producers, price supports, price caps, production quotas, import quotas, and tariffs. Demand management and Keynesian economics (helicopter money) are sometimes cited as mild forms of economic planning, designed to overcome cyclical instability inherent in market economies, or to make market economies function properly in a desired fashion.
[edit] Related concepts
Economic planning refers to planned economic activity in production. Planned economic activity may be direct (directive planning), or indirect as in the case of indicative planning. An economic system that is characterized by the primacy of economic planning over the market is referred to as a Planned economy, where resource allocation and the quantity produced is allocated by non-market means, usually through state-led planning.
Government regulation can also be a type of intervention when it inhibits, corrects or distorts the market mechanism in setting the price of a good or service.
[edit] Effects
Advocates of free market or laissez-faire economics tend to see government intervention in the economy as harmful, due the fallacy of central planning, the law of unintended consequences, and other considerations. Economically left-wing entities can see economic interventionism as a way of ensuring that firms adhere to the social boundaries of that country and that they often outweigh potential negative unintended consequences. It is difficult to suggest precisely what effects it will have on a given society.
[edit] See also
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