Government Failure in Public Goods

Government Failure in Public Goods

What are the four (4) major reasons for government failure?

Failure to increase supply due to increased demand is one of the factors that led to the government’s failure. Secondly, as the housing shortage bloomed in New York, demand exceeded supply and led to an increment of prices. The apartment providers had the option to turn to other investment opportunities. This not only reduced the supply of housing but also the quality of rental housing. Thirdly, imposing standards on the landlords failed to achieve the desired outcome and instead worsened the shortage. Fourthly, the advocates of rent control were unable to project a reduction in supply, which made it impossible for the government to act proactively (Stiglitz & Rosengard, 2015).

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Which of the four (4) apply to explain the excess demand created by the imposition of rent controls on New York City apartments after World War II?

The rent controls imposed standards on landlords, which did not function as expected since most had proceeded to other more profitable investments. Since this option existed, it was impossible for the government to ensure compliance with the rent controls. As more landlords left the housing rentals sector, the demand shot up, and those who remained charged more for these services (Stiglitz & Rosengard, 2015).

Explain both what “excess demand” and “rent controls” are.

Excess demand is realized when the current supply of housing rentals in the market does not address the needs of the clients. The consumers exceed the producers’ capability to fulfill their needs. Rent controls refer to standards and regulations that seek to govern the quality of housing rentals and prices for the same. Rent controls should ideally standardize the housing rentals by setting clear regulations for all landlords. Rent controls are also designed to ensure that supply and demand are well-matched to avoid excessive hikes in prices (Block, 2019).

References

Block, W. (2019). Rent Control.

Stiglitz, J. E., & Rosengard, J. K. (2015). Economics Of The Public Sector. W.W. Norton & Company Inc.

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Case Studies in Government Failure (in Stiglitz and Rosengard, 2015, p. 211). What are the four (4) major reasons for government failure?

Government Failure in Public Goods

Briefly explain each. Which of the four (4) apply to explain the excess demand created by the imposition of rent controls on New York City apartments after World War II? Explain both what “excess demand” and “rent controls” are.