Government Functions Essay

In the scotch system of any terra firma, the organization is the authorization governing the day to day transactions and dealings between individuals whether reclusive or public. Other functions ar enforcement of rules and regulations, handleing the devising and execution of contracts and setting of standards to be fol let outed. To do this, resources be required hence collection of assesses. The functions a nerve, the establishment activity itself owns firms within the saving hence a player. The role played by the state/ governing body has been at a gl atomic number 18 place c retire support and criticism simultaneously.In some countries, the governments role is wel father whilst in otherwises it detested. The main object of government in twain(prenominal) scenarios though is the all toldocation of scarce resources and creating an environment fitting for much(prenominal) resources to be exploited. This is achieved through ensuring that legal philosophy and sco re is maintained. orthogonal tolls incurred by businesses that ar non ingrediented in the business transactions are alike taken into grudge by the government. This is in order to protect them from developing which whitethorn otherwise lead to bankruptcy and collapse.The governments role shouldnt be solely that of creation of a good environment for business via guardianship of law and order. Rather, it should go beyond this by existence a key player in the economy. Law and order though facilitates stability as well as reduces degeneration hence encouraging enthronement. Using the opportunity bell principle, the uses to which scarce resources provoke be couch are many and the real costs are those which are forgone. These are incurred in cases where corruption is existent.Examples of such costs according to Sowell involve delay in military operation of current sparing activities aban through with(p)d an unviable corrupt sparing environment this pass ons to non -development of basic infrastructure that would wee been use to carry out the economic activity. In annul, planned investments do non occur hence active output levels are not increased due(p) to lack of expansion. The final results are normally unemployment attach to by brain drain as the environment is similarly not viable to work in. hardly put, higher corruption levels are accompanied by low economic yields and low per capita incomes.Other set up of corruption are discrimination in the employment sector and profiling of workers. Contri scarceing to slow economic growth are in any case long bureaucratic processes. All these contrisolelye to driving away investors. decomposition doesnt necessarily come in the form of direct bribes. It whitethorn also be in the form of nepotism and tribalism which is currently prevalent in most countries. The law being a set of rules and principles that are used in the day to day running of a verdant ought to charter the following chara cteristics- reliableness uniformity in coat i.e. they must portray a sense of paleness and equality rigidity i. e. they should not turn from time to time. Rigidity brings about stability. Countries with laws that have these characteristics are prone to boost investor corporate trust as well as encouraging skilled labor to immigrate into the commonwealth in bet of job opportunities. Such skilled labor whitethorn not have been available locally. This set of rules and principles should be impartial but discriminatory at the aforesaid(prenominal) time. The discriminatory aspect of some laws has at times be to boost economic growth. barely the statement holds only when the discriminating facet is known by the parties involved well in advance. If the discriminating temperament of the law is known, the economic environment impart be more than stable as compared to where the justice system is discriminatory in interpretation and application of the law. The law may be discrimin atory on the basis of aspects such as religion and race. However, if the economy grows, the growth impart be felt across the board and not just by those for whom the law discriminates. eve though some laws have discriminatory aspects, they should not in any way allow for the exploitation of one by another nor allow for the interference of ones activities by another with poisonous intentions. A countrys economy is majorly dependent on the existence of a government. Nonetheless, this dependability also takes into consideration the governments in force(p)ness in law enforcement. Geographically, some regions within the same country will have laws being more enforced than others. However, extra costs incurred by businesses in ensuring that goods and serve reach the consumers are always transferred to the same consumers.This reduces take on due to high prices. Property Rights On property rights, focus should be placed not just on the owners of such but more so on the general effect the existence and exercise of such rights has on the economy. The exercise of property rights may result to economic cause which shock negatively on the populace as thither maybe no angiotensin converting enzyme individual to blame. As a result, property rights should be closely monitored but tied(p) more emphasis ought to be placed on automatic self-monitoring by individuals as a solution.The uncorrupted 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- ingatheringivity results to increased growthivity and lower commodity prices as there is less wastage. However, negligence may also result on the part of the property owners and class stratification. However, accustomed that property rights do have a greater economic efficiency, the general population will have higher living standards when the economic growth that results trickles down.However, r ecumbrictions such as setting of minimum standards and creation of Boards to oversee the use of certain property should be put in place. These will help prevent exploitation. soaked laws need 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 big role and such rights need to be directed at from the economic angle i. e. the incentives that are brought about by them.One should also ask what the effects of ever-changing them or completely doing without them are. Social order is a function of existence of laws, government institutions to ensure the maintenance of law and order and acknowledgement of such by the citizens. The degree of complaisant order differs from one country to another as well as from one individual to another. It is the existence or inexistence of a social 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 ex slant to the rest of the community hence doing away with corruption then bringing down transaction costs. If the social order is inexistent or at a low level, enterprises lam to be small eggshell. This translates to lower production and by the economies of scale, the end user experiences higher prices. A good social order indeed attracts investment. The government cannister boost this by encouraging truthfulness within its administration, indirectly supporting or detesting cultures that are pro-honesty. The same can also be achieved via nurture curricula.Another factor that can either undermine or develop the social order are the nature of a countrys law. However, the market 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 par t to an factual transaction. These are however not accounted for in the market place and it is for this solid ground that the government has to come in to select decisions regarding external costs and benefits via legislation and regulations. Some benefits are indivisible. They are either a entire or nothing at all.To decide any aspect about them is thus better left field 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 elect governments, most of the decisions make by are not put into much economic consideration. Focus is actually mainly placed on making the heap happy and not necessarily on economic improvement. Most of such decisions are political and not economically beneficial to the country.CHAPTER 18 GOVERNMENT pay Like any other enterprise whether profit making or non-profit making, resources are n eeded to counterchange a business e a continuing venture. On the part of the government, its pass aspect if a factor of revenue collection. Revenue is raised via tax revenue collection. How this tax is collected greatly sees how much will in effect be collected as it impacts on the citizens mass on tax revenue policies. Any change in taxation policy by the government will automatically result in behavioral change by the tax payer in equipment casualty of expenditure and savings.This change is however in no scale predictable and may go at length to affect the performance of the economy at large. No rule can be said to be use by government to predict this change. The net tax paid by an individual is a factor of the number of taxes that are applicable on a said person and their position economically. Value Added task (VAT) takes a bigger share from the poor than it does from the rich as spending on consumer goods makes up a greater percentage of the poor persons budget whilst saving or re-investment makes up a greater percentage of the richs budget.However, tax paid by individuals is a mixture of both regressive and progressive taxes. However, the official legal indicator of incidence of tax does not necessarily express who bears the incidence of tax. Before a government makes decisions on whether or not to increase a particular(prenominal) tax, factors to be considered are how the tax is collected. This determines whether the tax is being felt by the individual or not. increase or decreasing the tax may thus not necessarily result to behavioral change by the consumer. One way through which government raises income is through sale of bonds.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 un coiled. 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, accrued beguile over time is one cost.This interest may affect investor confidence both in the unretentive 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 rate may bring about a ripple effect increase on other interest rates as investors look for money with which to purchase the bonds. Influence of government may however make product prices individual of their costs despite the above ripple effect they may have at the same time.In an economy, there always are unmet needs which the government must satisfy. However resource diffusion by government takes into account not the maximization of their use but quite m erely re-distribution. It is this that explains wherefore government may undertake projects that are not economically profitable or necessary as well as wherefore 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 foundation 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 clear who is bearing the cost and the nature of the cost. As returns varies from individual to individual, the desire to purchase due to pric e disparity can thus be bindled via price controls or subsidies.The latter have however proven more fruitful than the designer since subsidies transfer the total cost of an item to the entire 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 generalise 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 likely 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 eith er 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 concern Some have turn overd that in world(prenominal) trade, eyepatch one country gains, another loses. But both parties should be gaining in a way otherwise there wouldnt be a reason to trade. A country may gain via for example economic growth. This has been the general effect of planetary trade. However, footing used in international trade such as trade deficit 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 engage itself in international trade. Reasons for however out weigh those against. Those for include compulsory advantage, comparative advantage and economies of scale. In terms of absolute advantage, one country can pee-pee 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 ought to be higher hence making them economically viable. The returns 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 export s 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 International 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 competitio n finally.Arguments for International Trade restrictions Different arguments have been put forward for international trade to have restrictions. The high wage fallacy argues that commodities produced by exceedingly paid workers cannot compete with those produced by low paid ones. This does not hold since the argument does not appoint between wage rates and labor costs and between labor costs and total costs. employ 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 carry on jobs domestically.However, just as free 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 exertion argument posits that local developing industries ought to be accusto med 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.Political muscle plays a key role in determining the fate of an industry. The National 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 tradeing 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 deductions and aim to raise their prices. The restrictions may also be in the form of import quotas which bring about uneven competition b eside achieving the same objective of raising 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 race to invest in fashion plate rich counties due to fear of not getting a return on their investment if done 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 exchanged between countries leaving behind service output. It is for this that International trade has to be at a balance despite the fact that measures used 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 services and import more commodities. The decision of whether a trade deficit is subtle or not is best done by comparing the deficit with the performance of the whole economy. As a result, the quietus 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 emptor and the seller 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 lofty looting as the su bject 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 example 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 string section 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 giving of aid to poorer countries has resulted to exploitation of the pass catcher. 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 seller to another is always notable. This, economists would say defy the laws of supply and demand but in actual sense they do not. Rather, supply and demand 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 notion that is not realistic. It implies that prices should be independent of the market forces of demand and supply as well as production cost but should or else 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 h as 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 price products or services with brand names that are widely known will definitely cost or charge more. A business, no matter how small is linked to the economy as a whole.Te role different enterprises play in the economy is a factor of whether they are sort out as profit and loss or as non-profit making enterprises. However, there exist differences between the devil in that profit and loss organizations will always tend to emphasize on quality in order to maximize 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 organiza tion 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 reality 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 morality into business by defining words such as greed aboard maximization of profit for example and others. These non-economic values however put aside economic concepts 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 cannot be termed to be a product of any particular economic system.Rather it is an intricate trait in all human beingss 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.Exploitation 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 close to all types of economic systems, exploitation 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. Taxation by the government may howe ver 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 before pricing decisions are made.At times the employer for instance may be at the receiving end when the employee has a greater bargain 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 power 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 as sumptions. 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 specific exposition hence it is majorly those in power who are left to define 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 concerned with the distribution 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 economi c 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 continue to be refined and refuted, the bottom line should be that they all ought to divorce 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 pellucidity in order to ensure their true or intended ideology is achieved.A common property of most economic fallacies 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 direction 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 attainment 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 distinction should be made between what is practical and what is indeed a fallacy.