Every country needs a government to make decisions and get things done. These can be decisions about where to build roads and schools, or how to reduce the price of onions when they get too expensive or ways to increase the supply of electricity. The government also takes action on many social issues, for example it has several programmes to help the poor. It does other important things such as running postal and railway services.
One of the most critical but also most discussed points is the management and interference with externalities. These externalities can be positive but also negative. Usually, the positive externalities are managed by state-owned companies or very regulated public/private companies. Most of the negative externalities are usually mitigated by using laws, restrictions, and the introduction of standards. Problems with externalities can also involve a systematic “Market failure”. This occurs especially when individual incentives do not lead to rational outcomes for the group as a whole. These market failures often evolve to a certain point until the government intervenes and needs to regulate.
