Need for the Public Sector

Need for the Public Sector:

The important thing that points out the importance and need of the public sector is the fact that the market mechanism alone cannot perform all economic functions. Thus, the public sector is needed to guide, correct, and supplement it in certain respects. Prof. Musgrave pointed out that the need of the public sector/need for government intervention is felt because of the following reasons:

(1) The claim that market mechanism leads to efficient resource use is based on the condition of competitive factors and product market. This means, there must be no obstacles to free entry and that consumers and producers must have full market knowledge. Thus, Government regulation or other measures are needed to secure these conditions.

(2) They are needed also where due to decreasing cost, competition is inefficient.

(3) More generally, the contractual arrangements and exchanges needed for market operation cannot exist without the protection and enforcement of a governmentally provided legal structure.

(4) Even if the legal structure was provided, and all barriers to competition were removed. the production and consumption characteristics of certain goods are such that these goods cannot be provided for through the market. Problems of ‘externalities’ arise which lead to market failure and require solutions through the public sector.

(5) Social values may require adjustments in the distribution of income and wealth which results from the market system and from the transmission of property rights through inheritance.

(6) The market system, especially in a highly developed financial economy, does not necessarily bring high employment, price level stability, and the socially desired rate of growth. Public policy is needed to secure these objectives.

(7) The rate of discount used in the valuing of future (relative to present) consumption may differ as seen from a public and private point of view.

It is, thus, obvious from the above discussion that the importance of the public sector/need for government activity lies in the fact that the public policy is used to remove the limitations of market mechanisms and to perform the allocative, distributive, and maintaining economic stability and high employment in the economy.


Factors responsible for the slow progress of Social Education
Rousseau’s Views in regard to Education of Women
Hypothesis of Naturalism or Characteristics of Naturalistic Education
Development of Sociological Tendency in Education
Aims of Education in Vedic and Brahmanic Age
Major Concepts of Karl Deutsch Communication Theory
Six Principles of Morgenthau Realist Theory
Legacy of 19th Century– NIOS

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