The balance between markets and intervention

The balance between markets and intervention

Q5WK6L2

Enquiry question

Are market based or interventionist approaches to development the most effective or might a combination of both provide the most effective formulae for development?

Lesson objectives:

• Discuss the positive outcomes of market-oriented policies (such as liberalized trade and capital flows, privatization and deregulation), including a more efficient allocation of resources and economic growth.

• Discuss the negative outcomes of market-oriented strategies, including market failure, the development of a dual economy and income inequalities.

Lesson objectives

• Discuss the strengths of interventionist policies, including the provision of infrastructure, investment in human capital, the provision of a stable macroeconomic economy and the provision of a social safety net.

• Discuss the limitations of interventionist policies, excessive bureaucracy, poor planning and corruption.

• Explain the importance of good governance in the development process.

• Discuss the view that economic development may best be achieved through a complementary approach, involving a balance of market oriented policies and government intervention.

Key terms:

• Free market development policies - policies aimed at promoting economic growth / development through market mechanisms e.g. privatisation, deregulation of markets, low taxation, free trade, low government intervention in business, floating exchange rates and an absence of capital controls.

• Interventionist development policies - policies aimed at promoting economic growth / development through government intervention e.g. investments in human and physical infrastructure, protectionist trade policies, exchange rate intervention and regulation of monopolies.

Indicating the differences between free market and keynesian economic theory

Market-oriented policies is better than  interventionist policies in economic development of LEDCs. (Toulmin Model)

Ahnaf / Lucy / Vidushi / Yan Yew

Interventionist policies is better than Market-oriented policies in economic development of LEDCs. (Toulmin Model)

Ben / Yuqi / Andy / Jason

TOK

What criteria can economists use to decide on the balance between markets and intervention?