Question on govt interference with economy??

Question

Laws that restrict the consumption and sale of liquor (drunk driving laws, limited hrs and days that liquor stores and bars can be open, etc).( We don't restrict grocery store hrs or where milk can be sold). Is government justified in a market economy, according to an economics viewpoint??

Answer 1

1. I don't know where you live, but many governments do and have restricted grocery store hours.

http://en.wikipedia.org/wiki/Blue_law

http://en.wikipedia.org/wiki/Ladenschlus...

http://www.retailcouncil.org/retail_holi...

http://en.wikipedia.org/wiki/Bergen_Coun...

2. Economists have always recognized the existence of externalities and accepted that since the market price does not include all the costs, some sort of intervention is not inappropriate:

http://en.wikipedia.org/wiki/Externality

Some economists would argue that intervening in externalities should just be done to adjust the market price (i.e with taxes, etc.). But most people agree that that isn't always the right way. (For example, are you happy with the idea of letting your next door neighbor dump his trash on his lawn, making it a breeding ground for disease, etc. or are you going to use the law to force him to pay to have his garbage picked up and carted away?)

3. Though economics is important, and making money often seems the be all and all, there are other facets to life, at least for most people. The Market is not the supreme being, pure and holy - it is, at best, a good mechanism for making certain kinds of decisions.

No one really believes in having everything decided by the market. That means that while there might by an economics viewpoint, restricting yourself to it is be shortsighted.

(Do you really want the justice system run by the market - where it is O.K. to bribe the cop and the judge, either to let criminals go free or to incarcerate your innocent enemies?

Economists agree that without a stable legal system that protects the rights of the individuals (especially property rights), the market can't function effectively.)

4. As for government not interfering with the economy, where have you been living?

4.A. I assume that wherever it is, the government prints the money (there used to be private currencies, but I don't know of any left), has control over the money supply, etc.

4.B. The U.S. GDP is about $14 trillion. The U.S. Federal Government budget is about $3 trillion. The Federal Government is, by far, the single biggest player in the U.S. economy and the world economy. It can help but "interfere"with the economy. The only question is how it should, especially since its primary goals are NOT economic - the government is not trying to make a profit. (The very presence of such a large player with non-economic interests violates the assumptions used to prove the efficiency of markets.)

4.C. The U.S. state and local governments have a yearly budget of about $1.5 trillion. Again, smaller than the national government, but still a major factor. And again, not having economics as their raison d'etre, they have no reason to play by the rules of the corporations - they wouldn't be doing their job if they did!