2.2.5

State Provision & Information Provision

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State Provision (or Nationalisation)

The state can provide a number of goods and services for consumers. This is called state provision.

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State provision

  • The government either provides state provisions itself (e.g. state education) or provides free goods or services to the public that it's bought from the private sector (e.g. private health services offered free to NHS patients).
  • The government pays for goods/services through tax revenues. It then offers them to the public for free.
  • Examples:
    • The National Health Service (NHS).
    • Police service.
    • Secondary school education.
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Advantages of state provision

  • State provision can reduce inequality by redistributing money from the wealthy to the poor. This is something the market doesn't always do.
  • Without state provision, some services might not exist as they aren't profitable.
    • E.g. some train routes that aren't profitable do not exist.
  • Value judgements need to be made about what the state can and can't provide well.
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Disadvantages of state provision

  • Without a drive for profit, there is less incentive to make a service as efficient as possible. The economic incentives for efficiency could be eroded.
  • There is an opportunity cost of providing one service over another.
  • With asymmetric information, there is a risk of government failure.

The Provision of Information

Governments can spread information to try to overcome market failures. Below are some historic attempts by the UK government to improve market outcomes and welfare by spreading information.

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Diphtheria vaccine

  • The diphtheria vaccine was introduced in 1942. Before then it killed around 3,500 children each year.
  • Diphtheria was a bacterial disease that could cause heart failure and paralysis.
  • People feared that wartime conditions would make diphtheria more common, so the government introduced and advertised the vaccination (in newspapers, radio and posters).
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Polio vaccine

  • Polio is caused by a virus and can cause paralysis. It attacks the body's nervous system and blood.
  • Polio caused up to 750 deaths and thousands of disabilities each year.
  • The polio vaccine was introduced in 1956 and a campaign to vaccinate everyone under 40 was launched.
  • By 1980, polio had been almost eradicated in Britain.
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Lifestyle campaigns

  • The government tried to improve people's health choices in the second half of the 20th century.
  • The Change4Life campaign was launched in 2009. It tried to improve people's diet and encourage exercise. Obesity has risen in the UK and it causes lots of health problems.
  • The consumption of alcohol has risen in the last 50 years. The government's 2004 Drinkaware campaign aims to reduce drinking.
  • These interventions are very different to the laissez-faire policies of UK governments 100-300 years ago.

Jump to other topics

1Introduction to Markets

2Market Failure

3The UK Macroeconomy

4The UK Economy - Policies

5Business Behaviour

6Market Structures

7A Global Perspective

8Finance & Inequality

9Examples of Global Policy

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