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Details of national policies for the development of small scale industries?
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∙ 9y ago
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How can government policies improve the results of negative externalities?
When private bargaining cannot reduce the effect of negative exteralities, government policies can sometimes improve the outcome in two ways. One method is called command and control policies.This type of policy are regulations that require or prohibit certain behaviors. The difficulty is that regulators must know all the details of an industry and alternative technologies in order to create efficient rules. Prohibiting a certain behavior totally can sometimes be the best method if the cost of a certain type of pollution is huge and extremely damaging. Market based policies are another method. Such policies align private incentives with social efficiency. Taxes and subsidies may be used to internalize externalities.
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The World Bank can be considered the world's bank. Many governments (National and State) of various developing nations approach the world bank for monetary help with respect to various development project in their region. For ex: If the Chief Minister of the State of TamilNadu (India) plans on building a huge dam across one of its rivers and requires funding worth a few hundred crores of Rupees and does not have sufficient funding in his coffers, he can approach the world bank. He would have to submit a proposal with details of the plan along with details as to how he plans on repaying the borrowed money. If the World Bank feels that the plan will benefit the people of the state and also if they feel the state government will be able to repay the money loaned out, they will grant the loan.
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