Answer to Question #124565 in Economics for Joseph Danso

Question

Why is the government sometimes a part of the problem of coordination failure rather than the solution? Does this make the problem hopeless? What could be done in this case? explain your viewpoints

Answer 1

Coordination failure occurs when a group of firms could achieve a more desirable equilibrium but fail to because they do not coordinate their decision making. The government sometimes can be a part of the problem of coordination failure because of the next reasons:

1. one of the reasons is government officials/politician are highly corrupted and think of their own personal benefit rather against economic welfare.

2.the government has done under pricing of the factors of production during the industrialization process bc of which the returns to these factors have been considerably lower than that they capable of

3. the industrialization process and how the low prices for domestic agriculture produce for imported goods is responsible for coordination failure

4. there is also price discrimination seen in the commodity market

5. sometimes the government opts for foreign borrowing to fill its fiscal deficit but at the same time is inefficient in devising ways to promote export of goods or search new markets for export promotion that could arrange for money to pay back the interest on money borrowed from international market.