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  • Writer's pictureShaun Brien

Government Failure (or how our tax dollars are used to no real benefit)

It's early February and Unit 3 SAC's are quickly approaching and although it is hard to predict the exact questions which will be on the first SAC there is one that's a near certainty.

Due to the key knowledge "one contemporary example of government intervention in markets that unintentionally leads to a decrease in the efficiency of resource allocation.", you're basically guaranteed there will be a short answer question on the topic of government failure. Something along the lines of "analyse one contemporary example of the government intervening in markets which has led to a decrease in the efficiency in resource allocation". It would probably be a 4 to 6 mark question depending on how generous/mean your teacher was feeling when they wrote it. I tend to aim for around 4 marks to reflect similar questions which have appeared on past exams. Now for a question like this, firstly you would briefly describe what government failure is, then you would go on to give an overview of a contemporary example of market failure (see video below for a few contemporary examples). You'd explain what the government was hoping to achieve and then what actually ended up happening because of their intervention. Then you would tie this in to how it represents a decrease in the efficiency of resource allocation.

One recent example I've been pushing with my classes is the COVIDsafe app, however other interventions such as the minimum wage, NBN and JobKeeper are also great examples. The COVIDsafe app was designed at a cost of roughly $16 million dollars and has only helped to identify 17 potential cases, therefore costing almost $1 million per case. This represents government failure as it was designed to make us more allocatively efficient by minimising the time taken for close contacts of COVID cases to be identified and minimise the spread. Due to the app not being as functional as originally promised this was not actually the case and this money could've been better allocated to improving testing, contact tracing etc. If you have any questions about government failure feel free to comment below, join us on discord or watch the below video examining a few contemporary examples with bonus Simpsons memes relevant to the situation.

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