How do regulations affect the economy?

A viewer asked this question on 8/7/2000:

Hi, I was wondering if you could help me with an essay topic I have to reply to about government intervention. I need to discuss three methods of government intervention and I have decided to talk about regulations, taxation, and incentives. The problem is I don't really understand how taxation and incentives helps businesses and how it works. Could you help me out?
Thank you.

stevehaddock gave this response on 8/7/2000:

Taxation helps businesses by leveling the playing field between business that exact a very large toll on the public purse, and those that don't. For example, mining and large scale livestock production both have toxic side effects that often have to be repaired by the government. Taxes on industries that pollute encourage them not to.

Incentives help out businesses that for one reason or another have trouble getting started. For example, someone may want to open a plant in a high unemployment area, but there aren't a lot of skilled workers around. Training the workers would eat into the capital budget for the plant, so the government will agree to pay for their training.

JesseGordon responded:

... [economic distortion & deadweight loss from taxes, subsidies, & corporate welfare]

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