Positive And Empirical Analysis Of Government Intervention During The Transition Period

Nowadays, our government paid much more attention on social welfare. The achievement of social welfare depends largely on the roles that government plays in our society. From the experience of western countries, government not only assumes the function of re-distribution, but also it is the effective means of allocating resources. It plays an important role in the improvement of social equity and economical efficiency.However, too strong government intervention, to some extent, does not ensure that it is fit for the operation of market economy. On the other side, it may hold the development of market economy. There is an optimal condition for government intervention, which is the most suitable and effective government intervention. Government intervention is now well recognized by economists. While we must make sure that government intervention is effective, and it can ensure the maximization of social welfare.In the views of classical economists, like Smith, it is easy to define the function of government and market. They made conclusion of economical function of government from the necessary condition for the well performance of market, they also put forward government's role of"night watchman". A.C. Pigou raised the problem of exterior effects, Pareto efficiency will not be achieved, and it will lead to the malfunction of markets. The defects of markets provide sufficient basis for the government intervention. Since the publishing of"employment, interest and general theory of currency"( The General Theory of Employment, Interest, and Money) in the 1930s, government intervention began to develop vigorously, then some economic schools, like New Keynesianism, New Classical and New Cambridge came into being. They emphasized the function of government intervention in ensuring the high efficiency of market operation. Hayek opposed the opinion that governments should directly control the quantity, direction and price of production. He agreed that government should by means of proper laws and economic policies, create fine environment and frame for the free market competition. P.Streeton thought that only when government take complementary actions, could price influence the demand and supply. H.Shpiro and L. Taylor hold the opinion that there is much...