Sign Up Now
Get instant access to over 1 million+ study documents
OR
Already registered? click here to login
By creating your account, you agree to our terms of service, privacy policy and student honor code.
¶ … Economic Policy for an Imperfect World" by Karen I. Vaughn published in "Southern Economic Journal," Vol. 62, Issue 4, 1996
After the collapse of the Soviet Union it has become evident that market economies are necessary for producing wealth. However, the case for "free markets" is far from settled as those looking for an alternative to central planning usually consider "regulated market economy" as the solution. Hence the debate about how much "free market" or government regulation is appropriate, still rages. The ways in which contemporary economic theory contributes to the debate about the right mix of free market and government regulation is the theme of this article.
In the 1980s, a notable economist opined that government guidance was necessary for the 'invisible hand' to succeed. Some time later, another pointed out the lack of scientific evidence about the success of free markets. Other economists have even challenged some of the key assumptions of apparently settled economic theories.
It is clear that while enhancing efficiency is the goal of all economic policies, the "perfect' market models used by economists to predict the behavior of markets cannot explain the behavior of the markets in the real world.
Theories for Economic Policy Formation:
The related models of "perfect competition" and "general equilibrium" dominated economic theory in the 20th century. According to the perfect competition model,...
The theory of General Equilibrium also assumes similar equilibrium conditions in which no further improvement is possible. Some economists present these two models as argument for free markets but they actually give more support for regulated markets since perfect competition and full equilibrium conditions cannot be achieved by free markets. Furthermore, economists often assume market failure as a defect in the economy that can be corrected by government regulation; both these assumptions are not necessarily correct. The most oft-used theories for economic policy formation thus stand on shaky grounds.
Public Choice View:
There are a number of pitfalls in economic policy formation and governmental regulation such as influence of interest groups and conflicting agendas. The costs of market imperfections must, therefore, be weighed against the costs of implementing a policy. Unfortunately, the current economic models based on 'perfect' conditions do not provide adequate tools for weighing the alternatives since they do not replicate real life conditions.
Perfect Models, imperfect Reality:
The use of simplistic 'perfect' models to complicated real life world often leads to wrong conclusions. While it is true that these models help us to understand the complexities of the real world, it would be wrong to fall…
Unfortunately most growth oriented economic policies such as "supply-side" economic policies tend to exacerbate inequality. A greater role of the government in the economy such as increased taxation on the rich can reduce inequality. Inflation and unemployment are usually inversely proportional in most economies, i.e., increase of money supply through deficit financing reduces unemployment but increases inflation while tight monetary policies reduce inflation but increase unemployment. According to a
Economic Development and Trade In an era of increased globalization and advancements in technology, it has become increasingly important for all of the nations of the world to keep bringing improvements in their economic infrastructure and to expand their businesses on the global scale. It has been observed that without a reasonable level of economic development any country cannot gain a competitive position in the world market. This is the dilemma
The deal was immediately criticized as anti-competitive by William Kennard, the chairman of the Federal Communications Commission, and by the Communications Workers of America, which represents some workers at both of the merged companies. But neither government regulators nor union bureaucrats will have the slightest impact on the latest merger. They have neither the power nor the desire to oppose the plans of the giant telecommunications monopolies. More substantial opposition
Economics Evaluate explanations offered Economics of MNEs, China and Exchange Rates Evaluate the various explanations that have been offered for the existence of the multinational enterprise. China is a notoriously difficult place to do business. Explain what makes the business environment so challenging and explain the strategies a firm may use in order to overcome those challenges. Explain how exchange rates are determined in a floating exchange rate system and identify the key causes of
Conscription From the beginning of the war, there had been some variation in the Canadian attitude toward the conflict. Canada never questioned the legitimacy of the war and did not question the need for Canadian participation. There were differences of opinion, though, concerning how extensive the Canadian contribution should be. These variations affected the response to calls for enlistment and divided the country as the towns were more willing than the
Foreign Policy of China (Beijing consensus) Structure of Chinese Foreign Policy The "Chinese Model" of Investment The "Beijing Consensus" as a Competing Framework Operational Views The U.S.-China (Beijing consensus) Trade Agreement and Beijing Consensus Trading with the Enemy Act Export Control Act. Mutual Defense Assistance Control Act Category B Category C The 1974 Trade Act. The Operational Consequences of Chinese Foreign Policy The World Views and China (Beijing consensus) Expatriates The Managerial Practices Self Sufficiency of China (Beijing consensus) China and western world: A comparison The China (Beijing