Politicians have a strong incentive to follow a strategy that will enhance their chances of getting elected and re-elected. Political competition more or less forces them to focus on how their actions influence their support among voters and political contributors.

What is market failure, and what kinds of things can lead to market failure? What is government failure? Can government failure lead to market failure?

Review concepts like shortsightedness and rent seeking. What are the effects of government intervention in markets with some of the price regulations like price floors and price ceilings?

Government interventions have positive effects like the equitable distribution of wealth, preventing market failures like monopoly power, free-rider problem, or large scale poverty.

Step-by-step explanation

Voters are likely not to be well conversant on matters concerning politics and positions of contenders as the majority of them lack the incentive of doing so. Most voters have experienced historic trends and they tend to vote as for it being an obligation since they are not feeling any real change that will come to happen for their gain from elections. It is also known that politicians have a hidden agenda that is not clear and known to the voter. There are often elusive responses that do not give clear definitions to the voters.

Voters progressively see those strategies which have generally been announced by politicians and to the public. This produces an unfair perspective that leads to inconsistencies and politicians every so often go for short farsighted policies that have general long term undesirable consequences. Siting an example, the government provides a fiscal stimulus that might increase economic growth and progress in the short run, nonetheless, this will lead to a higher deficit.

Rent-seeking behaviour is a practice where public policies are being framed by politicians with an aim of increasing profits. Therefore monopoly firms tend to follow politicians so that they can increase barriers to entry and in so doing, increase their profits. In so doing the government benefits in terms of shady and recommendable deals and higher tax collection hence disadvantaging the consumer.

The effects of government to intervene in some of the existing markets using price ceilings and price floors to protect either the supplying firm or the consumers of the product in the industry. When there is excess demand in ways of price ceilings where the price does not go above a given level and price floors are then there is excess supply where the prices are higher than the equilibrium price.

References

Winston, C. (2007). Government failure versus market failure: Microeconomics policy research and government performance. Brookings Institution Press.