The inability of the market economy to create economic balance and the necessity of government intervention for aggregate demand (Case study of Herat province, Afghanistan)

Abstract

Government intervention in the economy is one of the controversial issues that has been debated in different eras and different views have been presented about it. The differences between these views can be examined in the form of various theories of different schools of macroeconomics and development strategies. For nearly two decades, the country's economy has been governed by a market economy. Since the society of Afghanistan is traditional and operates on the basis of traditional economy, the market system is more utilitarian. The government should launch plans, intervene and explain their failures and successes in achieving goals such as efficient resource allocation, full employment, and social goals such as eliminating poverty, improving income distribution, and changing demand as a whole. In this article, first, the market economy-based framework is described and also, the opinions of thinkers who agree with government intervention in total demand management are discussed and evaluated. Finally, while explaining the inability of the market mechanism, some suggestions for government intervention in the economy is presented in order to drive aggregate demand.