4. Government Intervention to Protect Suppliers and Employees.

What types of govt intervention can be used to protect supplies and employees?

1. Trade union power

2. Nationalisation

3. Wage regulation.

4. Fines from regulator.

What is nationalisation?

When the government buys back private sector firms into state ownership.

Give 5 advantages of nationalisation.

1. Removed need for external regulation.

2. Can limit externalities.

3. Prevents exploitation: suppliers paid, wages higher.

4. Can ensure services are accessible. e.g. water

5. Prevents private, natural monopoly explotation.

Give 6 disadvantages of nationalisation.

1. Moral hazard

2. Lack of competition

3. Expensive to buy back firms

4. No profit motive leads to inefficiency

5. Political interferences (decisions driven by political motives)

6. Information failure