Governmental Market Intervention - Research Paper Example

The first of these which will be discussed is that of those individuals and economists that believe that any level of governmental market intervention is a net negative to the economic efficiency. This particular approach relies heavily upon the concept of deadweight loss and the loss of corresponding efficiency that is lost when the natural dynamics of supply and demand are changed according to governmental regulation/intervention. This deadweight loss represents an ultimately loss of efficiency which in turn reduces the total rewards that both the supplier and his/her component parts as well as the consumers will be able to experience within the given situation (Grawe, 2007).

One of the most prominent economists that espoused such a point of view is of course Adam Smith; considered by many to be one of the most important figures in establishing a modern understanding of economics. The strength of this particular approach is the fact that it is verifiable on even the most basic of supply and demand curves. Conversely, the greatest weakness that such an approach exhibits is the fact that it is wholly unable to account for the needs of economically at risk individuals and families that could be operating upon the very margin of society at any given time.

Conversely, those that believe that government intervention can represent a net positive for the economy and society espouse the belief that the a certain degree the price ceilings and/or minimum wages that the government can regulate. The basic evidence that those who espouse such a point of view point to is the fact that it is able to regulate an otherwise cut throat environment and more appropriately bring it in line with the needs of a society that cannot be understood by simple representation of supply and demand curves (Popp et al, 2011).

One of the most advocates of this particular school of thought is John Maynard Keynes; the founder of the Keynesian school of economics which has dominated the nation’s understanding of economic concepts for over the past half century. The disadvantage of such a system is the fact that the loss of efficiency to both parties is measurable to even the most basic of economists (Pinotti, 2011). Conversely, one of the most powerful benefits of such an approach is the fact that it is one of the only economic interpretations that seeks to provide a level of social understanding to the hard and “dismal science” of providing for unlimited wants with limited resources (Boettke, 2012).

Although there is probably no absolutely right or wrong approach as a function of the two which have thus far been elaborated upon,