WS 9. Government Failure: Pollution When, how and why should the government intervene in a market? Many economists feel that governments are all too ready to correct apparent market failure by intervening in markets to correct the perceived failure - only to make matters worse by doing so or by creating other problems which could be seen as being more serious than the original problem! The aim of this Activity is to investigate some cases where governments intervene, to identify the nature of the market failure and the problems a government might face in 'solving the problems. Consider the following problem: River pollution is found to be rising at levels above acceptable limits, especially in areas near to urban conurbations Why do people pollute rivers and what could be done to solve the problem? In whose interest is it to see such problems resolved and what power do they have to influence the decision-making process? Tasks: 1. In this case, identify the nature of the market failure - why are these problems arising? 2. Identify potential measures the government might use to intervene in the market to correct the perceived failure. There may need to be a variety of solutions (at least two) used, each of which contributes in some way to the solution. 3. How might the government measure the effect of the intervention strategies you have identified in question 2 above? What problems might they face in gaining an accurate measure of such effects