House Shortage and Government's Duty

Topics: Supply and demand, Problem solving, Adam Smith Pages: 2 (470 words) Published: July 12, 2011
Housing shortage in big cities can cause severe consequences. Only government action can solve this problem. To what extent do you agree or disagree?

Housing shortage has reached such proportions that people believe that only government can solve this problem. Admittedly, the government can alleviate the present situation, for the reason that it can issue some policies to intervene in this affair, especially that it can function as a balance between the booming population and the limited land resources. But government’s intervention can not be the only way.

We can not deny the fact that free market is the most useful method in solving economic problems, definitely including the housing problem. Just like what Adam Smith said, the free market can be compared as the invisible hands. Once the housing demand gets ahead of (surpass)the housing supply, the land agents will build more houses in order to fulfill the market needs and to make profit from it as well. Whereas the government compelling policy will break the supply-demand rules in the free market. Also, the demand of the houses is flexible, which means what we face now is comparative housing shortage but not absolute shortage. We all know the price of the houses is increasing dramatically in recent years. Some people are eager to have their own houses but they cannot. Some rich people are madly investing in the real estate enterprises, thus leads to the present condition that a considerable amount of the houses are left empty. But if we solve problems by the invisible hand, there must be some day in which the price of the houses will fall down.

As is known to us all, the government has always played an important role considering china’s economic situation. On one hand, unlike ‘invisible hands’, which works on the real estate via supple-demand and will always takes long time to reach the market’s balance, the government can always issue relevant policies directly, through which the market can come back...
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