The importance of government policies in the areas of competition and technology has been the subject of much debate. Analyze the rationale for government policy making and provide examples regarding the need for policies in developed countries versus developing countries.

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Government policy relates to both competition and technology in crucial, but different ways.  In developed countries, government policy can place regulations on monopolies and trusts and prevent unfair competition from dominating a marketplace.  In the 1970s, the US government broke up AT & T as a monopoly, and since that time, competition has flourished as new companies and competitors entered the market, the price has dropped for consumers and quality of service has risen.

In terms of technology, government policies can stimulate and provide incentives for its development, which is often risky and expensive.  So government absorbs some of the risk with research grants and tax credits so that private companies will undertake that risk more willingly. When new technologies are developed, the positive effects they have on the economy far outweigh the tax benefits or money spent on the grants.  Solar and wind power research at universities right now are being heavily subsidized by the recent stimulus package.

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