Mechanism, for Distributing and Rationing

¶ … mechanism, for distributing and rationing most government services differ from that for distributing goods through the market?

Government goods and services are largely distributed to individuals through nonmarket rationing which means that distribution is equal to all regardless of ability to pay or their willingness to use service. For instance, vehicle-owners may be obligated to have their cars smog-tested regardless of whether or not they wish to do so. The government pays for the service. This is utterly polar to the way the free market behaves which distributes its services according to those who can afford it and, ipso facto, according to those who request it. Another differnce between provision of government services and business offerings are that the former weighs cost of services or goods according to certain criteria such as age of applicant, income level, family status, residence, or payment of certain taxes, fee, or charges. Recipients of Medicaid, for instance, must be of a certain age, income level, and so forth. Participation in certain schooling in a certain area necessitates that children belong to that geographic district.

The government also works through a mixed economy structure, rather than the pure market economy that is representative of market activity. The mixed economy is one where government supplies the vast majority of the goods and services and regulates private industry. Government expenditures constitute one-quarter to one-half of GDP, whilst taxes (to support the heavy expense activity of providing to a mixed economic nation) are at least one-quarter of the national income. Use of taxes and subsidies is decided by the government.

A pure market economy, on the other hand, would distribute its goods solely through the market and exclusively for a profit. Prices would be determined by the climate of supply and demand, and individuals would purchase according to their volition and ability. It would also be a private enterprise, rather than undertaken via, and for, political ends.

Moreover, pure market economy involves the fact that individuals own their own private possessions and use them or sell them according to their volition, whilst in a mixed market economy, individuals are mostly constrained to use the service in a certain way, conditions are attached, and individuals have to frequently share those services with others. They also cannot be arbitrarily sold by users as an individual in a pure market economy, for instance, can, when he wishes to sell his good another.

Further, in a pure market economy all goods and services are produced by business and forces of supply and demand inevitably and conclusively determine prices. In a mixed economy, on the other hand, government purchases land or housing (for instance), requiring others to pay for these purchases, and then uses these purchases to produce further goods which it makes accessible to the public. Prices, rather than being implemented by forces of supply and demand, are charged by government to businesses and households often at rates below market price.

There is also a differnce between the categories of services offered by a mixed market enterprise and that of pure market where the mixed market sectors offer both transfer payments where government provides benefits to certain individuals so that they can afford the program and later repay government a comparably minimal token later (e.g. medical insurance to qualify for Medicaid) and only a much smaller amount is used for consumption expenditures (such as national defense).