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Extract F (Lines 4 – 5) Suggests That Public Goods Such as Flood Defences Have to Be Paid for by Somebody. Evaluate the View That the Provision and Maintenance of Flood Defences Should Be Paid for Solely by the Government.

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Submitted By AlexLangrish
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Government intervention is need when there has been a market failure due to a misallocation of resources. The government intervention is imposed to try and fix the negative externalities produced from the consumption or production of a good or service. In this case the market failure is resulting from the felling of trees for farming and wood purposes. The flood defences are a public good which is a good that is non excludable good and non-rival good.
If the government were to pay to for the provision and maintenance of the flood defences, it would be using money from tax revenue from the population of the whole UK. The problem with this also is that you will get those that do not pay for the service benefiting from the service, called free riders. Also means that people would be paying for the provision of a good that is not provided for them. Another way that the government could provide the flood the defences is through money raised through taxes on the forestry and farming companies. This is also shown in diagram 1 as the tax revenue area. This method would be indirectly charging the forestry and farming firms which are the ones that have caused the negative externality. This will mean that the marginal social cost will now be equal to the marginal social benefit, which has maximised the amount of social welfare.
The insurance companies that cover the housing estates could also help with the payment of the maintenance of the flood defences. This is because in the long run, there costs would be much greater if they did not maintain the flood defences as they would have to repair massive damages on the housing if they were flooded. In the short run they will not benefit from the maintenance but if the insurance firms want to increase their survivability they will help to maintain the flood defences.
Another party that could pay for the provision of the flood

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