To what extent should the canadian governement intervene in the market economy?

[William Hartanto]

Since it is a grade 9 question, I'll keep it simple.

Market economy is where the producer is free to produce whatever they want and the supplier is free to buy whatever they want, and the market (i.e. the supply and demand) determine the price and the product being created.

This is opposed to planned economy where the government tell the producer what to make and the consumer get allocated the goods and services based on their allocation system (e.g. Soviet regime between 1920s to 1990)

Now, in the world, there is no 100% market economy (and its unlikely that there is 100% planned economy, even Russia has its black markets). There are "free market economists" out there who believe that a good government is a small government. Why? Because they believe that the market will be able to allocate resources better than any government can. They believe if let alone, market will produce the needed goods and services in the most efficient way.

But while this is often true, this is not always the case. The market is very efficient at creating needed goods and services, but it is not very efficient at distributing wealth. USA is a prime example. The wealth gap in that nation is the largest in any developed nation. It becomes the nation of the have and have not. But it is, "on average", a very wealthy nation.

Now we come to part of economy that you shouldnt tell your economics teacher (unless he's an open minded liberal): Free Market economists are wrong. While on theory they are sound, they lack empirical (real world data) evidence. But lets skip this for your grade 9 exam.Let's go to what government should intervene in.

Government all over the world has intervene in:
1. Education of the citizens, either by providing public schools or help in paying the fees
2. Healthcare, Transport, Maintaining "public goods" like roads and highway, some even still have national electricity and telecommunications company controlled by government.Basically if it is IMPORTANT and you don't want the private sector to provide it only to the wealthy, government should control it.
3. Income distribution (taxes, subsidies to the unemployed/poor)

Now this is highly heretical to Free market theorist, but Cambridge economic professor Ha-Joon Chang believes that government also should intervene in:
1. Tariffs (tax to import) and subsidies to "infant" economy
2. Regulations of important private sectors (like banks and finance, to prevent 2007 crisis)

Anyway, i hope that's enough starting point for your essay. Good luck.