Government Intervention

Who's Intervening in What?

In economics, government intervention, or simply intervention, refers to government involvement in markets.

Markets are generally the most efficient way to organize economic activity, however, markets can fail to achieve societal goals and standards, such as sustainability, equity and economic well-being.
In a free-market, the price of goods, and therefore the resulting supply and demand of goods.

For example markets reaching efficiency through exploitative practices such as slave labor or monopolies controlling the price of a market.
In this case government intervention is required to sort things out and keep things on track.
In many states, there isn't a true free-market. The government usually has some sort of involvement in the pricing of goods, ideally with the goal of improving wellbeing in society.

The government tends to try and reduce supply and demand of harmful goods (i.e. cigarettes and other drugs) and increase the supply and demand for beneficial goods (i.e. vaccines and agricultural produce).
The main way governments do this is through indirect taxes, subsidies and price floors or ceilings.

In the real world, it is often difficult to decide when and how much government intervention is needed, leading to many disagreements among economists and policymakers.
A good balance needs to be struck however, as too little intervention can lead to the rise of exploitation and loss of economic well-being and equity.
However, too much intervention, especially in the hands of a corrupt government, can easily lead to planned economies, where the government controls what is sold and for how much, often stalling economic and societal progress.
For example totalitarian states like Nazi Germany and the U.S.S.R. often create planned economies, facing both the benefits (government control over the market) and the downsides (inefficiency and economic stagnation).