State Provision and Regulations

• State provision overrides the market mechanism and provides goods and services for free at the point of access.
• Public goods and goods with strong positive externalities are examples of goods that require full state provision.
• Value judgments need to be made on what goods and services should be provided by the government due to the high cost and limited resources.
• The balance between the private and public sector is a topic of ongoing debate in terms of efficiency and equity.
• Regulations are legally enforceable standards used to address market failures and can be challenging to enforce and may have high costs.

This module discusses two approaches to addressing market failure: state provision and regulations. State provision involves the government providing goods and services that the market cannot effectively handle, such as public goods and goods with strong positive externalities. However, this approach is expensive and requires trade-offs due to limited resources. The balance between the private and public sectors is also a topic of debate. Regulations, on the other hand, are legally enforceable standards used to promote or prevent the production and consumption of goods with positive or negative externalities. They are employed when subsidies or taxes are deemed insufficient. However, enforcing regulations can be challenging and costly. Some countries have considered legalizing certain goods and regulating them instead. Additionally, strict regulations can be seen as overly interventionist in liberal democracies.