Corporate Social Responsibility

Q1:

Why not?

Free market economics - government intervention should be strictly limited as government intervention tends to cause an inefficient allocation of resources.  the 'invisible hand' of free markets ensures a smooth running economy.

1. Governments liable to make the wrong decisions – influence by political pressure groups, they spend on inefficient projects which lead to inefficient outcome.

2. Personal freedom. Government intervention is taking away individuals decision on how to spend and act. Economic intervention, takes some personal freedom away.

3. Market is best at deciding how and when to produce.

Arguments against Government Intervention

* When governments spend on public goods and merit goods, they may create excess bureaucracy and inefficiency.

* State owned industries tend to lack any profit incentive and so tend to be run inefficiently. Privatising state owned industries can lead to substantial efficiency savings.

* Politicians don’t have the same market discipline of seeking to maximise the use of limited resources.

* Government intervention causes more problems than it solves. For example, state support of industries may encourage the survival of inefficient firms. If governments bailout banks, it may create moral hazard where in the future banks have less incentive to avoid bankruptcy because they expect a government bailout (support).

* Real business cycle theorists argue that at best government intervention makes no difference to the length of a recession, but may just create additional problems, such as the accumulation of public sector debt.

Q2

Q3

Market-based options provide greater flexibility for firms and seem particularly appropriate in the context of policies to reduce GHG emissions. For some types of pollutants, it matters that emissions at any particular point or region do not exceed health-related thresholds. For those types of pollutants, command-and-control regulation is often the...