Asked by Robert Pesta on Jun 09, 2024
Verified
Why are the public sector and private sector "imperfect institutions"?
Private Sector
The part of an economy that is owned and operated by private individuals and businesses, as opposed to the government.
Public Sector
The part of the economy that is controlled by the government, including various public services and enterprises.
- Comprehend the principles behind government failure and identify its underlying causes.
- Evaluate the effectiveness of institutions in the private sector compared to those in the public sector.
Verified Answer
GM
Gabrielle MoralesJun 11, 2024
Final Answer :
The view of a benevolent government that responds with precision and efficiency to its citizens' wants isn't accurate. The market system of the private sector is far from perfectly efficient, and government's economic function is mainly to correct that system's shortcomings. But the public sector is subject to deficiencies in fulfilling its economic function. "The relevant comparison is not between perfect markets and imperfect governments, nor between faulty markets and all-knowing, rational, benevolent governments, but between inevitably imperfect institutions." Because markets and governments are both imperfect, it is sometimes difficult to determine whether a particular activity can be performed more successfully in the private sector or in the public sector.
Learning Objectives
- Comprehend the principles behind government failure and identify its underlying causes.
- Evaluate the effectiveness of institutions in the private sector compared to those in the public sector.