The role of government in managing a capitalist economy

This essay focuses on the role of government in managing a capitalist economy. You can choose between two applications of this broader concept.

Option 1: Many have pointed to the Great Depression as strong evidence that market economies, if left on their own, will sometimes get stuck in periods of low growth and high unemployment. Others have claimed that the Great Depression was primarily a policy failure and that government attempts to fix business cycle downturns only delay the economy’s natural recovery. To what extent do you think the above viewpoints are valid? Was the Great Depression primarily a failure of markets or a failure of government?

Option 2: Most economists agree that competition between firms in general produces outcomes that are beneficial for consumers. However, profit maximizing firms have incentive to drive out competitors and increase their market power to drive up prices. Should governments work to reduce monopoly power and push industries toward perfect competition? To what extent has United States history demonstrated the need for government action to reduce firms market power?

Sample Solution