The Study On Stiglitz’s Theory Of Government Intervention

Government and market are two indispensable power in society, and plays a positive rolein promoting the development of the economy, but the absolute government and the absolutemarket will cause the absolute failure, so that the relationship between government andmarket is the eternal subject of economic theory. However, both the liberal economic thoughtof the market school or the theory of government intervention of the government school arebased on the assumption of complete information, complete markets and perfect competitionto research, and the range of market failure is only confined to the externality, monopoly andincome distribution. Stiglitz broke through the traditional theories assumption, from theprospect that is more close to the reality economic, to study the relationship betweengovernment and market by analysis tools of information economics. Stiglitz says that marketfailure is widespread under the real economy of incomplete information, incomplete marketand imperfect competition, and achieving the optimal allocation of resources requires theestablishment of partnership between government and market, which requires not only have astrong market, but also has a powerful government.Because government intervention in Stiglitz’s thought is based on the reality economicenvironment, it has very good instruction function to the real economy. This paper is based onstudy of Stiglitz’s theory of government intervention, and combs the scope and means ofgovernment intervention to provide theoretical guidance for China to deal with therelationship between the government and the market in the process of economic systemreform. This article conducts the research on Stiglitz’s theory of government intervention fromfive parts.The first part mainly introduces the research background, research significance, presentresearch situation at home and abroad and points of innovation.The second part mainly elaborates the producing condition of the Stiglitz theory ofgovernment intervention. The social, economic and practical that Stiglitz lived in inspired histhoughts on government intervention. Stiglitz thinks, whether the liberal thought of market school or the Keynes’s theory of macroeconomic intervention is based on the base of completeinformation, while the information in the real world is not complete. On this basis, Stiglitzbegan to re-examine the relationship of the market and the government from the angle ofinformation economics.The third part mainly elaborated the main content of Stiglitz theory of governmentintervention, which is the main part of this research. Under the real conditions of theincomplete information, incomplete market and incomplete competition, the market failure isnormal and very broad in scope, so government intervention is not only necessary, but also thescope of intervention should to be widen. Stiglitz thinks, the government can correct themarket failure by virtue of their own advantages through direct control, indirect control,government regulation and government decision-making methods, and requires to give fullplay to the government and the market at the same time in the process of intervention effect.The fourth part compares Stiglitz and Keynes theory of government intervention.Keynes’s theory of government intervention make the economic function of the government’sfocus on the stability of the economy (maintain economy under conditions of full employment)while Stiglitz’s theory of government intervention mainly studies on the government’sfunction in resource allocation. In this part is mainly to compare the two theories from thegovernment intervention and the scope of intervention and other aspects.The fifth part mainly introduces my perception of Stiglitz thought of governmentintervention, including rationality and limitations of his thoughts, and puts forward somesuggestions on the macroeconomic management for our government.