Government intervention can distort market efficiency from "summary" of Basic Economics by Thomas Sowell
When the government intervenes in a market, it often does so with the intention of improving outcomes for certain groups or achieving specific social goals. However, these interventions can have unintended consequences that end up distorting market efficiency. One way in which government intervention can distort market efficiency is through price controls. By setting price floors or price ceilings, the government can disrupt the natural equilibrium of supply and demand, leading to surpluses or shortages in the market. For example, if the government sets a price floor for agricultural products above the equilibrium price, farmers may produce more than consumers are willing to buy, resulting in a surplus of goods that goes to waste.
Another way in which government intervention can distort market efficiency is through regulations and red tape. When the government imposes burdensome regulations on...
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