Macroeconomics concepts and applications

Government Subsidies and Alternative Fuel Technologies

The government should not subsidize alternative fuel options. This is due to the fact that a free market that follows the basic supply and demand curve should be allowed to function as a product of the available technology. This is to say that fossil fuels and other related fuels will continue to stay in demand as long as there is a supply of them and the willingness to pay. Government subsidies disrupt the supply curve as well as the willingness to pay for alternative fuels. Such subsidies create incentives to follow and develop technologies which themselves have no natural market based upon principles of supply and demand.

Technology itself cannot create a new future, s to speak. However, humans, armed with the proper technology and free market dynamics can. This means that as humans develop new technologies, and these technologies become cheaper and more readily available, people's willingness to pay drops, sending the demand for higher priced goods lower. This in turn creates an incentive for companies and individuals to develop technologies as cheaply and as quickly as possible in order to take advantage of the demand for such technologies. Once the demand for fossil fuels subsides due to scarcity or other environmental concerns, other technologies will emerge naturally, due to free market forces. Government subsidies only get in the way of free market forces and force both developers and consumers down a specific, often politically driven path relative to technology.

Incentives for businesses to adopt new technology are usually fiscal in nature. This means that unless the market can support a technology, from a demand standpoint, it won't be pursued or pushed any further. This can sometimes limit the types of technological exploration but it guarantees that first a market will exist for such technologies and that the government subsidies are not creating an artificial demand or market for something that is not as sustainable or even practical as what would have been developed because of free market forces. Government subsidies create an artificial business environment based upon altered supply and demand curves.

Debt and Developing Economies

Forgiving developing countries' debt is a bad idea. Developing nations, by definition, have some of the highest GDP growth rates in the world. Therefore, it is expected that a loan or other fiscal aid should be returned rather quickly as long as said money is loaned to the developing nation at a fair interest rate. This means that the interest rte would not exceed the inflationary or growth rates of the developing nation's economy. In this way, as the nation grows, it will be able to service the debt it incurs. However, if the developing nation's economy slipped or begins to slow, it would could be a good idea to refinance the debt in terms that would create a higher likelihood that that debt would be repaid.