3. Government Policies, Institutions, and Benchmarks for Assessing Government Performance

This chapter delves into the intricacies of government policies designed to rectify market failures and pursue social goals. It begins by examining two types of government microeconomic policies that can lead to government failures: those addressing market failures such as natural monopolies, monopoly power, imperfect information, externalities, and public goods, and those pursuing social goals like reducing poverty, combating employment discrimination, and providing merit goods. The analysis extends to the institutions responsible for formulating and implementing these policies, including Congress, various government departments, and agencies. The chapter also introduces benchmarks for assessing government policies, emphasizing the importance of economic efficiency and the potential trade-offs between efficiency and other policy objectives. It concludes by highlighting the challenges in evaluating government policies and the significance of considering both economic and non-economic factors in policymaking. Readers will gain insights into the complexities of government policy analysis, the role of institutions in policy implementation, and the importance of efficiency benchmarks in assessing policy performance.