Government & the Economy

Who do you trust more, the government or markets?
Who do you trust more, the government or markets?

The tension between government policy and markets is best understood by considering lobbying efforts by special interest groups. Many groups have strong incentives to lobby for policies, often at the expense of the general public. This leaves economists to debate whether flawed government action is a better alternative than the results of markets, which also fail to produce a socially optimal level of output.

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Can you define efficiency and give a few examples?<...

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