Causes of Government Failure Featured

Written by Matt Pringle
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Government failure happens when the government intervenes to correct for a particular market failure but for various reasons ends up making the situation worse. It is an important concept when it comes to evaluating the effectiveness of government intervention.

The causes of government failure can be remembered with the use of the acronym ICAUSE:

nadequate Information
dmin Errors
nintended Consequences
elf Interest

For example you might wish to argue that a tax on landfill is an appropriate solution to the negative externalities caused by refuse disposal. There are many reasons why this would be a good idea, such as reducing pollution and internalising the externality, but there are also some problems. One of the biggest is that of unintended consequences. It may be that instead of producing less rubbish people reduce the amount going to landfill by burning waste in their back garden, creating air pollution or dump it on waste land (fly tipping). These certainly reduce the effectiveness of government intervention and may be so damaging that it would have been better if the government had not got involved in the first place.

This comes into Unit 1 of the AQA Economics specification but is also useful in unit 3. Below is a revision presentation that will take you through in a little more detail. Either click through slide by slide or click on a cause of market failure to learn more about it.

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