chapter  5
48 Pages

The role of the government in the different economic branches of the Israeli economy

Most economists believe that the best method for resource allocation is to allow the market to reign freely. Government intervention in the market is justified only when the market fails. Market failure may result from the existence of public goods, externalities or economies of scale. It can then be impossible to get an equilibrium price, or the market price may not reflect all relevant social costs and benefits.