Around the world, governments, mostly intervenes in the market in order to accomplish their policy objectives. The government’s policy objectives or goals could be related to economics, ranging from stabilization of prices, export promoting, encourage equal distributions for income and commodity protection. The examples as per above proves that government intervention is not only limited to economic effects also influences the society. There are two (2) types of usually regulated government interventions, which are automatic and discretionary. Automatic can ale defined as intervention which is based on rules and regulations. On the other side, government interventions which are discretionary mostly targets stopping, suspension or limitation of a certain contract market.
Apart from that, most of the government’s intervention happens when the market affects future markets or total cash widely. Some examples of interventions are controlling of prices, direct buying of buffer stocks, duties, embargoes, quotas as well as policy implementations that impacts prices.
An early review of government market interventions shows that discretionary based interventions usually fails in accomplishing targeted policy objective compared to interventions based on rules as the latter proves to be more successful in a market economy. At the same time, discretionary interventions gives results that are undesired that could be quite damaging and high cost to the government. The harmfulness in this aspect can be defined as total impact on those involved in either marketing or producing commodities.
Government Intervention Worries
A government’s worry on the assumption and inflations rates of the market is not quite unusual among the many governments in the world. For an example, your very own government might be highly concerned on the price of staple that consumers are paying for currently. From time to time, voted lawmakers in economics markets demand the role playing of opportunists especially when the consumer prices for food commodities raise precipitately in the future market.
Some of the instances of latest market closures happened because of politically aware occurrence, or, perhaps some nature disaster that prompts market closure. For an example the US market was shut down for about four days after the 9/11 tragedy and the major flood destruction in 1992 which closed down the Chicago Board Options Exchange (CBOE). (Singh, et al., 2007)
When it comes to the evaluation of the intervention, some of the measures in order to weigh either the accomplishment or failure of the government’s intervention in the market are comparatively upfront. Some of the straightforward criteria are the objective of the government’s intervention in the market, substitute or alternative tools and techniques in order to accomplish the targeted objective, success rate of the intervention tools used in realizing the objective as well as expenses involved which...