IMPROVE ECONOMIC EFFICIENCY

The government has the ability to correct two market failures that interfere with competitive markets: inadequate information and public goods.

Promote Transparency. Efficient and competitive markets need adequate information. Transparency is a term used to indicate that information and actions are not hidden and instead are easily available for review.

Public disclosure, the requirement that businesses reveal certain information to the public, is an important way to do this. Most government documents, studies, and reports are now available on the Internet.

Provide Public Goods. A free enterprise economy does not provide public goods in sufficient quantity because such efforts usually do not result in direct financial gain. This means that many of the things society values – good roads and highways, museums and libraries, and education – must be provided by government.

Public goods are important because they make the economy more productive. For example, businesses need reliable transportation so that they can move their raw materials and final products. In addition, their employees need to be able to easily communite to and from work.

So because the government is involved in certain aspects of our economy, it is a modified version of free enterprise.

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