Purpose
This essay asks you to move from identifying a public-sector issue to diagnosing the economic reason government might intervene. Many policy arguments begin with the claim that something is unfair, expensive, dangerous, inefficient, or socially harmful. Those concerns may be real, but in public-sector economics we need to go further. We need to identify the mechanism.
For this essay, your task is to choose a policy problem and explain the market failure or public-sector rationale behind it. A strong essay will not simply describe a bad outcome. It will explain what goes wrong when the issue is left to private markets or individual decision-making.
Prompt
Choose one policy problem and write a thesis-driven essay diagnosing the market failure or public-sector rationale that justifies government involvement.
Your essay should answer the following central question:
What exactly goes wrong in the private market or private decision-making process, and why does that failure create a possible role for government?
You may choose from topics such as pollution, vaccination, public education, student loans, food labeling, monopoly power, public transit, disaster insurance, overfishing, public safety, homelessness services, health insurance, national defense, broadband access, financial regulation, environmental protection, or another relevant policy problem.
Required Elements
Your essay must do all of the following:
- Identify the policy problem clearly.
Choose a specific issue. Avoid broad topics such as “health care,” “education,” or “the environment” unless you narrow them. For example, “lack of health insurance among low-income workers,” “public funding of K-12 education,” or “carbon emissions from electricity production” would work better.
- Explain the relevant market failure or public-sector rationale.
Your essay should identify which concept best explains the problem. Possible concepts include:
- Public goods
- Free rider problem
- Externalities
- Incomplete markets
- Imperfect information
- Imperfect competition
- Property-rights failure
- Tragedy of the commons
- Redistribution
- Merit goods
- Macroeconomic instability
You may use more than one concept, but do not simply list several. Explain which one is most important and why.
- Explain the mechanism of failure.
This is the most important part of the essay. You need to explain how the failure works.
For example:
- If the problem is an externality, who creates the external cost or benefit, and who experiences it?
- If the problem is a public good, why is private provision likely to be too low?
- If the problem is imperfect information, who lacks information, and how does that distort choices?
- If the problem is incomplete markets, what good, service, insurance, or credit arrangement is not being provided even though people may value it?
- If the problem is imperfect competition, how does market power affect price, quantity, quality, or access?
Do not stop at naming the concept. Show the causal logic.
- Explain what happens without intervention.
What is the likely outcome if government does nothing? Would there be overproduction, underproduction, underconsumption, exclusion, overuse, monopoly pricing, excessive risk, misinformation, or some other inefficient or undesirable outcome?
- Connect your diagnosis to policy design.
Explain why the correct diagnosis matters. A policy aimed at an externality may look different from a policy aimed at imperfect information. A policy aimed at a public good may look different from a policy aimed at redistribution. If we misunderstand the problem, we may choose the wrong tool.
- Make an argument.
Your essay should have a clear thesis. Do not simply describe the policy area. Your thesis should make a claim about what the central market failure or public-sector rationale is and why that diagnosis matters.
Questions to Consider
You do not need to answer every question below, but they may help you develop the essay:
- What is the private market outcome?
- Who makes the relevant decisions?
- Who benefits from those decisions?
- Who bears the costs?
- Are the costs and benefits reflected in market prices?
- Is anyone able to free ride?
- Is the good rival or non-rival?
- Is the good excludable or non-excludable?
- Is the problem caused by missing information?
- Is the problem caused by missing markets?
- Is the problem caused by market power?
- Is the problem really a market failure, or is it mainly a distributional concern?
- What would a better policy need to correct?
Structure
Your essay should include:
- A title
- An introduction with a clear thesis
- A clear explanation of the policy problem
- A diagnosis of the relevant market failure or public-sector rationale
- An explanation of the mechanism
- A discussion of what happens without intervention
- A conclusion that explains why the diagnosis matters for policy design
A strong essay will not say only that “government should intervene.” It will explain why private markets or private choices are unlikely to produce the desired outcome, and what kind of economic problem that creates.
Course Concepts You May Use
Useful concepts from Week 2 include:
- Policy analysis framework
- Need for a program
- Market failure
- Property rights
- Tragedy of the commons
- Public goods
- Pure public goods
- Rivalry
- Excludability
- Free rider problem
- Externalities
- Imperfect competition
- Incomplete markets
- Imperfect information
- Merit goods
- Redistribution
- Government failure
You do not need to use all of these terms. It is better to use a few concepts carefully than to name many concepts without explaining them.
Evidence and Sources
You should use course material from Week 2. Outside research is allowed, but it is not required. If you use outside sources, cite them clearly.
The main purpose of this assignment is not to collect facts about a policy area. The main purpose is to show that you can diagnose the economic problem using the concepts from the course.
Grading Criteria
This essay will be graded on the following criteria:
Policy problem
The essay identifies a specific policy problem rather than discussing a broad issue in general terms.
Market failure diagnosis
The essay accurately identifies the relevant market failure or public-sector rationale.
Mechanism
The essay explains how the failure works. It does not simply name a concept.
Connection to policy design
The essay explains why diagnosing the correct failure matters for choosing a policy response.
Use of course concepts
The essay uses relevant Week 2 concepts accurately and meaningfully.
Thesis and organization
The essay has a clear argument and is organized around that argument.
Writing quality
The essay is clear, readable, and edited. The writing should be direct and analytical.