Hello Okoth Douglas here, reporting from Machakos Town,
The idea of government is a concern for every society’s existence. What is government? Government is simply defined as the act of governing, ruling and controlling. According to the Oxford English dictionary government is defined as the group of people who are responsible for controlling a country or a state.
Here are the 6 roles of a government in the economy.
- The government provides the rules and regulation through the constitution to protect the market. Laws and regulations help to promote free and fair competition and consumer protection.
- The public sector is required to provide goods and services that cannot be provided through the market owing to the problem of externalities and market failure for example provision of national security. An Externality is something that, while it does not monetarily affect the producer of a good, it does influence the standard of living of society as a whole such as pollination of surrounding crops by bees kept for honey.
- Even where market forces are used to allocate resources there must be a significant large public sector to provide regulation and laws that will provide the required protection otherwise there will be no property rights.
- The government also formulates and implement economic policies through the central banks that are needed to guide the, correct and supplement the course that the economy will take on its growth and development over time for example provision of free economy.
- Due to the disparities in income and wealth. the government seeks to ensure equal distribution of wealth and income between the rich and the poor since without any intervention the poor will continue to be poorer and the rich will continue to be richer. To curb the widening gap between the rich and the poor the government should tax the rich and provide services which the poor cannot afford without subsidies.
- Private sectors invest where returns are high while public sectors look at the overall benefit of a project to the community even if the returns are low for example governments provides health care services, schools because such projects have a low return rate on investment but have greater benefit to the community.
Thanks for reading this article. Have fruitful day, won’t you?