Friday, February 22, 2019
Government Functions Essay
In the stinting system of entirely commonwealth, the presidential term is the office staff goerning the day to day transactions and traffic between idiosyncratics whether hugger-mugger or public. Other portions argon enforcement of rules and regulations, con carrying the making and execution of contracts and setting of standards to be followed. To do this, choices atomic number 18 required so collection of taxati whizs. The functions aside, the policy-making relation itself owns firms indoors the preservation hence a tourer. The role played by the fix/ establishment has been under c get support and criticism simultaneously.In whatever countries, the political sciences role is wel scram whilst in others it detested. The main intention of government in two scenarios though is the all(a)ocation of scarce resources and creating an purlieu suitable for oftentimes(prenominal) resources to be exploited. This is achieved through ensuring that lividity and requ est is maintained. extraneous follow bafflered by businesses that atomic number 18 non featureored in the business transactions atomic number 18 excessively taken into account by the government. This is in roam to protect them from exploitation which whitethorn otherwise lead to bankruptcy and collapse.The governments role shouldnt be solely that of creation of a good environment for business via maintenance of law and order. Rather, it should go beyond this by be a key player in the thriftiness. rightfulness and order though facilitates stability as hearty as reduces go underrefaction hence encouraging investment. Using the opportunity embody principle, the roles to which scarce resources gage be lay atomic number 18 many and the real cost argon those which atomic number 18 forg unrivalled. These atomic number 18 incurred in cases where corruption is inhabitent.Examples of much(prenominal) costs jibe to Sowell include delay in per descriptorance of certain sparing activities scarpering(p) an un feasible corrupt scotch environment this results to non- ramp upment of basic infrastructure that would extradite been utilize to carry prohibited the sparing activity. In uprise, planned investments do non occur hence existing output levels argon not increase out-of-pocket to lack of expansion. The final results atomic number 18 normally unemployment accompanied by drumhead drain as the environment is similarly not viable to work in. Simply put, high corruption levels are accompanied by low economic growths and low per capita incomes.Other cause of corruption are discrimination in the employment sector and profiling of workers. Contributing to silent economic growth are also great bureaucratic processes. totally these contribute to driving away investors. Corruption doesnt necessarily come in the form of direct bribes. It whitethorn also be in the form of nepotism and tribalism which is soon prevalent in well-nigh cou ntries. The law being a set of rules and principles that are employ in the day to day running of a uncouth ought to hold back at the following characteristics- reliability conformity in application i.e. they must portray a sense of fair-mindedness and e bore rigidity i. e. they should not switch from time to time. Rigidity brings slightly stability. Countries with laws that seduce these characteristics are prone to boost investor confidence as well as encouraging skilled labor to immigrate into the pastoral in search of calling opportunities. much(prenominal) skilled labor whitethorn not have been available locally. This set of rules and principles should be impartial but judicial at the corresponding time. The discriminatory cheek of some laws has at quantify proven to boost economic growth.However the statement holds only when the incisive facet is known by the parties touch well in advance. If the separate nature of the law is known, the economic environment g et out be to a great extent stable as compared to where the justice system is discriminatory in recitation and application of the law. The law whitethorn be discriminatory on the fanny of aspects such as religion and race. However, if the economy grows, the growth ordain be matte up across the board and not just by those for whom the law discriminates.Even though some laws have discriminatory aspects, they should not in any way allow for the exploitation of one by another(prenominal) nor allow for the interference of ones activities by another with cattish intentions. A soils economy is majorly dependent on the humanity of a government. No displacehe slight, this dependability also takes into consideration the governments durability in law enforcement. Geographically, some regions within the same country impart have laws being much enforced than others. However, extra costs incurred by businesses in ensuring that goods and ser frailnesss reach the consumers are forever t ransferred to the same consumers.This reduces learn due to high prices. Property Rights On station rights, focus should be hardened not just on the owners of such but to a greater extent so on the general effect the creation and exercise of such rights has on the economy. The exercise of property rights whitethorn result to economic set up which usurpation negatively on the crowd as on that point whitethornhap no single individual to blame. As a result, property rights should be closely monitored but even more emphasis ought to be put on automatic self-monitoring by individuals as a beginning.The mere fact that the property rights do exist creates a sense of self-monitoring on the individual which is more effective and less costly as compared to government monitoring. This self-productivity results to change magnitude productivity and raze trade good prices as there is less wastage. However, negligence whitethorn also result on the part of the property owners and co ntour stratification. However, given that property rights do have a greater economic efficiency, the general population impart have higher living standards when the economic growth that results trickles down.However, restrictions such as setting of minimum standards and creation of Boards to oversee the use of certain property should be put in place. These ordain help prevent exploitation. Stringent laws call for also be put into place by governments and respective authorities. In creation and application of restrictions to property rights, one has to have in mind that property rights do have intentions and effects. Economic incentives by the government do play a huge role and such rights invite to be looked at from the economic careen i. e. the incentives that are brought intimately by them.One should also ask what the effects of changing them or completely doing without them are. Social order is a function of existence of laws, government institutions to ensure the maintena nce of law and order and mention of such by the citizens. The degree of loving order differs from one country to another as well as from one individual to another. It is the existence or inexistence of a kind order and its level that determines how business dealings are conducted between individuals. Social order should be upheld in all aspects of government.This may in turn extend to the rest of the community hence doing away with corruption thus bringing down transaction costs. If the social order is inexistent or at a low level, enterprises tend to be small measure. This translates to lower production and by the economies of plateful, the end user experiences higher prices. A good social order thus attracts investment. The government end boost this by encouraging honesty within its administration, indirectly load-bearing(a) or detesting cultures that are pro-honesty. The same sewer also be achieved via shoal curricula.Another factor that squirt either undermine or deve lop the social order are the nature of a countrys law. However, the commercialise placeplace has a way of creating its own social order. External costs and benefits do exist in business and they occur outside the parties that are part to an actual transaction. These are even so not accounted for in the market place and it is for this reason that the government has to come in to involve finiss run acrossing orthogonal costs and benefits via legislation and regulations. Some benefits are indivisible. They are either a whole or no social occasion at all.To decide any aspect about them is thus better left to government. External costs on their part are felt either directly or indirectly by individuals. The individuals thus decide basing on how the external costs impact them and their activities. In countries with popularly elected governments, most of the decisions made by are not put into much economic consideration. Focus is actually in the first place primed(p) on making th e people happy and not necessarily on economic improvement. Most of such decisions are political and not economically beneficial to the country.CHAPTER 18 GOVERNMENT FINANCE Like any other enterprise whether usefulness making or non-profit making, resources are mandatory to enable a business e a continuing venture. On the part of the government, its using up aspect if a factor of revenue collection. receipts is raised via tax collection. How this tax is collected greatly reachs how much pull up stakesing in effect be collected as it impacts on the citizens view on tax income policies. Any change in taxation policy by the government leave behind automatically result in behavioral change by the tax payer in impairment of expenditure and savings.This change is nevertheless in no collection plate predictable and may go at length to affect the performance of the economy at large. No rule can be s attending to be applied by government to predict this change. The net tax paying b y an individual is a factor of the number of taxes that are relevant on a said psyche and their position economically. Value Added revenue enhancement (VAT) takes a bigger share from the poor than it does from the rich as expenditure on consumer goods makes up a greater serving of the poor persons budget whilst saving or re-investment makes up a greater percentage of the richs budget.However, tax pay by individuals is a mixture of some(prenominal) regressive and progressive taxes. However, the official legal indicator of incidence of tax does not necessarily show who bears the incidence of tax. forward a government makes decisions on whether or not to increase a particular tax, factors to be considered are how the tax is collected. This determines whether the tax is being felt by the individual or not. Increasing or decreasing the tax may thus not necessarily result to behavioral change by the consumer. One way through which government raises income is through deal of bond s.It is this level of sale of government bonds that determines the national debt. The impact the national debt will have on the economy is a dependent on what percentage it is of the countrys GDP. However, both GDP and national debt increase over time as a result of increased population size. The vice versa is also true. Sale of bonds is considered a future investment by the government and who bears the cost of the national debt is worth considering i. e. whether it is the government or the tax payer. To the government, accrue interest over time is one cost.This interest may affect investor confidence both in the short and long term. As bonds are sold and re-sold over time, their interest rate has to be increased lest they lose their value. This however lowers investor confidence in the long run. The rise in government interest rates may bring about a blether effect increase on other interest rates as investors look for money with which to leveraging the bonds. Influence of gove rnment may however make product prices independent of their costs despite the above shuffle effect they may have at the same time.In an economy, there always are unmet inevitably which the government must satisfy. However resource dispersal by government takes into account not the maximization of their use but kinda a merely re-distribution. It is this that explains why government may compress dispatchs that are not economically profitable or necessary as well as why some public utilities are offered at prices which are way below their actual market value or at no value at all. Spending by the government is mainly a factor of whether or not there is the need to spend whilst the principles behind such spending are outlined by the law.Through its expenditure, the government is able to influence the economys net purchasing power. Increased government spending implies more money will be in the economy thus leaving more at the hands of households for spending on other commodities other than those for which the government has already paid for. Costs as a result of government spending can either be to the government or the economy. It should be blow over who is bearing the cost and the nature of the cost. As utility varies from individual to individual, the intrust to purchase due to price disparity can thus be controlled via price controls or subsidies.The latter have however proven more fruitful than the agent since subsidies transfer the total cost of an item to the holy population rather than letting a single individual to incur it. Here the cost is thus on the economy, not the government. From this, one can deduce that government finance comes in to bring a solution to the price-utility problem by creating an even bigger problem or rather shifting the cost from the government to the economy. The pattern of government expenditure is majorly a political function.Projects that prove politically building are more credibly to be undertaken. Any government has got its obligations and current and future expenditure make up the governments obligations regarding expenditure. Future obligations may seem not that costly until it reaches a point where they must be incurred. Their costs are accounted for but not incurred until the need arises. Incentives can be either political or economical. Incentives such as government pensions are majorly dependent on the size of the working and the retired population. A good balance enables pension payment.On the private side however, payment of insurance benefits is dependent on the currently existing subscribers to the insurance. CHAPTER 20 INTERNATIONAL TRADE Some have argued that in internationalisticist good deal, bit one country cods, another loses. But both parties should be gaining in a way otherwise there wouldnt be a reason to dole out. A country may gain via for example economic growth. This has been the general effect of international trade. However, terms employ in international tra de such as trade shortage and surplus do not necessarily reflect a countrys economic wellness.To determine this, one has to look past the figures involved in international trade. A country may have quite a number of reasons why it should or should not fasten itself in international trade. Reasons for however outweigh those against. Those for include absolute usefulness, comparative advantage and economies of scale. In terms of absolute advantage, one country can uncover particular commodities at prices cheaper than those of another or products of a higher quality. This may encourage it to pursue international trade.As for comparative advantage, the opportunity cost of one country A to produce a certain commodity at the expense of another is much lower than that of country B. comparative advantage is thus all about efficiency of one country as compared to another. The costs forgone in producing a product should be lower and income generated from the production line opted for oug ht to be higher hence making them economically viable. The restorations should also be in surplus enough for the country to purchase the commodity it forgo to produce.In terms of economies of scale, some ventures are viable only if there is enough market to consume the output. Such markets can be created through exports of commodities hence maximizing advantages brought about due to economies of scale or large scale production. Apart from enabling countries to achieve economies of scale, international trade also facilitates countries to fully utilize their comparative and absolute advantages. However, economies of scale have also resulted in the downfall of some infant industries where protectionist policies are inexistent.In as much as many countries may engage in international trade, some succeed whilst others do not. Reasons for the downfall of others may be the restrictions that exist in foreign Trade. These include emphasis that has been placed on efficiency of the production process. Another effect of such restrictions are collapse of domestic industries where protectionism does not exist. However international trade itself brings about government interference with trade due to policies such as protectionism while it may result to creation of monopolistic markets and unfair competition finally.Arguments for International Trade restrictions Different phone lines have been put forward for international trade to have restrictions. The high wage fallacy argues that commodities produced by highly paid workers cannot compete with those produced by low paid ones. This does not hold since the contestation does not distinguish between wage rates and labor costs and between labor costs and total costs. Wage rates may therefore be higher yet the total costs are lower due to economies of scale hence higher profits. Restrictions may also exist so as to save jobs domestically.However, just as clear trade results to growth in the economies of all countries engaged simultaneously so do trade restrictions result to reduced economic growth or even reversed economic growth. Restricting trade thus does not result in increased employment. Rather, there will be less spending in the economy. The infant industry argument posits that local ontogenesis industries ought to be given time to grow to a level at which they can compete with other industries. However, survival of an industry is not a factor of its growth in terms of production and sales. policy-making pass plays a key role in determining the fate of an industry. The study defense argument tries to explain why countries opt to have suppliers of things that are essential for their own national survival lest the external supplier turn enemy. Examples of such commodities are ammunition. Last on the list of reasons for protectionism is the dumping argument which is however restricted given the uncertainties of determining production costs. Here economies of scale may come into play and a supplier selling his/her commodities at lower prices abroad may actually be mistaken for dumping.These restrictions to trade may come in the form of tariffs which are taxes on events and propose to raise their prices. The restrictions may also be in the form of import quotas which bring about uneven competition beside achieving the same objective of acme import prices. CHAPTER 21 INTERNATIONAL TRANSFERS OF WEALTH International wealth transfers may take the forms of either direct or indirect foreign investments or remittances from citizens whose domicile is abroad. Rich countries always tend to invest in lumberman rich counties due to fear of not getting a return on their investment if through with(p) in a poor country.Political and economic stability, corruption levels, level of honesty amongst the countrys populace as well as movement of capital within a said countrys economy are factors affecting the decision of whether to or not to invest. International trade takes into account only goods transfer between countries leaving behind service output. It is for this that International trade has to be at a balance despite the fact that measures utilise in international trade may not be true reflectors of the trade.An economy that has concentrated in service production rather than goods will tend to export more operate and import more commodities. The decision of whether a trade deficit is harmful or not is best done by comparing the deficit with the performance of the whole economy. As a result, the Balance of Payment measure is a better reflector of international trade than the Balance of Payments. Economic transactions are not zero-sum activities where only the buyer and the vendor gain, rather it is a wealth creator to both the parties directly involved and to the spectators. Immigration and emigration which are key factors in international trade result to knowledge transfer, new ideas and businesses being created, job creation amongst others. However, on the dark side of the same are diseases, brain drain, increase in crime, collapsing economies and terrorism. Imperialism which implies the domination and exploitation of one country by another is also a means of wealth transfer. However, international investments have been argued to be equal to imperial looting as the subject country loses more than it gains.This explains the class strata of first, second and third world countries. Ceteris paribus, imperialism is more of a moral than an economic argument. Foreign aid, which entails wealth transfer from richer to poorer countries or from one government to another, may or may not be used for intended purposes. The use of foreign aid in government investments has more often than not resulted to mismanagement due to corruption. Some foreign aid comes with strings attached in the form of Structural Adjustment Programs (SAPs). Such aid has proven to deter rather than encourage development.World over, the inexistence of a body to oversee the gi ving of aid to poorer countries has resulted to exploitation of the receiving system. Aid may be in the form of cash grants or goods and services to the recipient country. However, the under-utilization of most of the resources in the recipient country is what leads it to have a need for foreign aid. CHAPTER 23 MYTHS ABOUT MARKETS The name market in itself is a myth as a market is viewed as a thing rather than the people in the market themselves who are engaging in business activity. This has led to rigidity of the market.In a market, variation of prices from one vender to another is always notable. This, economists would say defy the laws of supply and postulate but in actual sense they do not. Rather, supply and occupy should be looked at from the point of view of different consumers. Each consumer will have a different of demand and supply curve intersections due to utility. Prices in the market ought to be affordable and reasonable is a tactile sensation that is not realist ic. It implies that prices should be independent of the market forces of demand and supply as well as production cost but should instead party favor the purchasing power of the consumer.The third myth about markets is that some firms may tend to sell their products at below normal prices so as to drive away competition. This myth has not been proven though hence is not that realistic. Fourth is the issue of branding. Despite its advantages of making suppliers and manufacturers to emphasize on quality, the products being sold are more or less the same. What will actually be different is the pricing products or services with brand names that are goodly known will definitely cost or charge more. A business, no matter how small is think to the economy as a whole.Te role different enterprises play in the economy is a factor of whether they are classified as profit and loss or as non-profit making enterprises. However, there exist differences between the two in that profit and loss org anizations will always tend to emphasize on quality in order to increase profits whilst in non-profit making organizations, the customers themselves will not be in a position to emphasize on quality since they are already paying far less than the true value of the commodity or service they are getting.It is the nature of the organization that finally determines what name will be given to the extra amounts remaining after costs as well as how it will be used. In some its called profit whilst in others it is revenue. The Trickle down theory is more of a political than an economic theory. The theory posits that those opposed to equality in resource distribution tend to believe that resources should be bestowed on the rich so that it may in effect trickle down to the rest of the populace. The theory is a myth since economically one has to spend first so as to make an income.This spending comes in the form of say purchase of goods and services for sale as well as payments made for their delivery. The economic human beings is thus exactly the opposite of the Trickle Down effect. CHAPTER 24 NON-ECONOMIC value Economics is not a value in itself. Rather it compares values. The market on its part is a reflector of the peoples attitudes and actions as well as beliefs. The issue of the market with respect to moral and social values arises when the market is looked at from the angle of the impact it has on such issues.The societys moral standards will determine how transactions are conducted in the market. Non-economic values in the market tend to introduce righteousness into business by defining words such as voraciousness alongside maximization of profit for example and others. These non-economic values however put aside economic excogitations like the laws of demand and supply that are used in price determination. These non-economic values are also one-sided since they tend to lean on the consumers side mostly whilst forgoing the sellers side. However, greed canno t be termed to be a product of any particular economic system.Rather it is an intricate trait in all humans and which all have to cope with. The difference however comes with regard to how this greed manifests itself in the different economic systems and how it is controlled. The term greed is however neither adequate or fair in explaining the desire of the seller to make as much profit as possible out of the buyer nor the wish of the buyer to purchase the product with the highest quality at the lowest price. Greed is thus a two way concept which only looks at who is on the gaining end. developing is another term that crops up whenever non-market values are mentioned. It can simply be said to be that which is beyond the acceptable as per the societys moral standards. Exploitation is thus based on emotion and not the facts existing on the real world. The disparity between greed and exploitation comes in that whilst the former occurs in almost all types of economic systems, exploitati on mostly occurs in monopolistic markets where no free competition exists and the buyer has no wide choice of commodities given the factor of the sole supplier.To regulate the above, the government may put in place regulations such as trade barriers, tariffs and quotas as well as value added tax or corporate taxes. revenue by the government may however be considered as both greed and exploitation. Greed since even the poorest of persons in the economy pays taxes whether in the form of VAT or income tax and exploitation as the government enjoys a monopoly of taxing the people yet one may argue that the quality of services is not guaranteed. The market however takes into consideration many factors in the first place pricing decisions are made.At times the employer for instance may be at the receiving end when the employee has a greater bargaining power or where the demand for services he/she can render is higher than what the market can supply. Here, both greed and exploitation come into play. In as much as governments try to control or maintain at a low the levels of exploitation and greed, the measures put in place readiness actually serve to make even worse the life of the consumers in cases where exploitation and greed did not exist before.The principle of fairness when looked at from the non-market values point of view carries with it two assumptions. First is that all individuals are playing by the same rules and secondly that all players have the same potential. However, these two may not hold as different individuals have different desires, priorities and thus derive different levels of utility from the same activity, commodity or service. Fairness doe not have a ad hoc definition hence it is majorly those in power who are left to pay back what is and what is not fair.However, vested interests may underlie the making of such decision. Some groups may also be completely ignored in deciding what fairness is. Economics being majorly tincted with the d istribution of resources and values tends to critic unmet needs of the society. Here, the decision of whether a government should carry out a project or not is a function of what has to be sacrificed in order to satisfy the unmet need. However, the existence or identification of an unmet need is not a justification of it to be met. CHAPTER 25 PARTING THOUGHTSThe economic concepts and principles cannot all be listed given the imaginative nature of the human mind. However, in as much as new concepts and principles are being developed whilst older ones come up to be refined and refuted, the bottom line should be that they all ought to part from emotions which vary from human being to human being. Rather there ought to be basic concepts and principles that are followed by both new and old economic ideas. The above fallacies ought to carry precision in the use of words as well as clarity in order to ensure their true or intended ideology is achieved.A common feature of most economic fa llacies is that they focus on the initial consequences of particular policies and not the long term effects of the same. Confusion thus results as focus is placed not on the benefits or effects of policies but rather on the objectives of such policies. The importance of economic principles supersedes their use in only economic factors. If keenly looked at, most things do have economic aspects in which economic principles ca be applied.Instead of focusing on the objectives of goals, of main concern should be the activities that will be pursued t achieve such goals, what the particular legislation or goal encourages and discourages, the regulations that will follow the science of the goal, the long term effects of activities aimed towards attaining the goal. Last but not least, we ought to look at similar goals that were attained in the past and the impact they had. In as much as economics carries many fallacies, a character should be made between what is practical and what is indee d a fallacy.