Government Failure
Government failure occurs when government intervention causes greater welfare loss than the market failure it attempts to correct. It results from information problems, political incentives, and bureaucratic inefficiency.
Real World
The EU's Common Agricultural Policy spent over €50 billion annually subsidising farmers, creating butter mountains and wine lakes — surpluses that cost more to store and dispose of than the market failures they aimed to fix.
Exam Focus
For top marks, compare the welfare loss from intervention against the original market failure rather than just listing problems.
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