Economics for international political economy
The government influences full employment in an economy in various ways. The essence of full employment, therefore, means that the given economy under study operates at full capacity and that there is no visible gap in the demand for employment. It is a good thing for most governments to target full employment in their economies because this can help in addressing issues associated with high rates of unemployment as well as reduces the existing social and economic costs in the society and economy. Usually, government intervention plays crucial roles in an economy. Most free market economies are influenced by the government through practices such as the administration of justice, the provision of public goods and the regulation of important economic aspects such as demand and supply (Licandro, 2016).
It is therefore imperative that the governments in such jurisdictions be involved so that they can make the nations realize the dreams of achieving full employment. This can be achieved in different ways such as through the reduction in the costs of education and training which eventually increases the qualification of the citizens to grab the available employment opportunities. It is quite important to note that most governments are also currently involved in streamlining their legislation policies to focus much on the promotion of technical and vocational skills which can enhance the creation of employment to the youth as desired. The establishment of employment laws and regulations governing the conduct of employers and their relationship with the employees come in handy in creating a suitable employment scope and environment as well as promoting the interest of workers in a given economy.
This is in line with the present-day perception of the role of government in a society, whichis defined for protection, provision of employment as well as ensuring and advocating for economic growth and development. With authority's intervention, humans might stop competing, and in flip, it causes that fees will increase and exceptional decreases. As mentioned above, Adam Smith diagnosed great regions wherein best authorities may want to act correctly, and then identified three particular duties for the authorities, and believed all needless interventions need to be averted. For example, every country should be defending all residents and society from foreign invasions, after which the necessary finances, is envisioned. However, it does not imply that government can contain into the alternative societies and reasons to create plenty of factors.
This is likewise identical for the availability of systems of justice. Two models can be used to explain the intervention of governments in full employment in different economies. The neoclassical growth model, put forth by the Solow-Swan explains full employment based on the consideration of long-term analysis of the economy by focusing on factors such as the accumulation of capital, labor as well as the population growth rate to explain how such factors increases or decreases a country’s productivity based on the integration of technology(Suresh, 2010). The diagram below can represent a simplified version of this model: Another model is the Keynesianmodel. Still, the government plays a crucial role in dealing with the negative output gap through establishing policies and financial regulatory measures to facilitate the creation of full employment.
The figure below gives an insight into how this can be achieved in the long-run perspective. From the graph above, it is evident that any initiative taken by the government to reduce the natural state of unemployment can help in reducing the effects of inflation in the economy and this would motivate the citizens to take initiatives of being employed. This would eventually lead to an improved Gross Domestic Products of such economies and hence an improved standard of living. It must also be noted with cognizance that reduction in the level of unemployment will push a country that is in economic disequilibrium to the equilibrium state and this would mean that value and quality of such a country's output can be monitored and regulated through the various monetary policies set forth by their governments and the central banks.
In conclusion, it can be confirmed with certainty that the role of government in creating full employment in an economy is so important and cannot be underscored (Hein and Stockhammer 311). Conclusion Most governments target full employment for their economies for various reasons. Firm Dynamics in the Neoclassical Growth Model. Mitchell, W. , & Muysken, J. Full Employment Abandoned: Shifting Sands and Policy Failures. Gloucestershire, England: Edward Elgar Publishing. M. Young Generation Awakening: Economics, Society, and Policy on the Eve of the Arab Spring. New York, NY: Oxford University Press. Section 2 1. Competitive Market and Optimal Social Outcomes. Product homogeneity –this refers to a situation where firms in a competitive market produce same or nearly same products that are the product produced by one firm can be used as a substitute of a product produced by another firm(homogeneous).
No firm can increase the price of their products higher than the price of other firms in the competitive market as this will make the firm that increases the price to even lose more customers as customers will easily switch to buy from firms that offer the same product at a relatively lower price (Reidenbach & Goeke, 2006). In other words, when firms produce products that cannot be substituted by each other in a market (heterogeneous), every individual firm have the power to increase the price of their products above their competitors without of losing their customers or business. Free entry and exit- this means that there is no special cost required for entrants of new firms into the market or exit of existing firms when they are not making profits.
However, pharmaceutical industries are not perfectly competitive markets since one requires a legal license to authorize him or her to enter into to sell drugs and there are many existing firms with a competitive advantage to sell drugs (Nguyen & Wait, 2015). , & Hodgson, B. J. Economics as Moral Science. Berlin, Germany: Springer Science & Business Media. Nguyen, B. Reidenbach, R. E. , & Goeke, R. W. Competing for Customers and Winning with Value: Breakthrough Strategies for Market Dominance. There exist key differences between the two economic perspectives with the Keynesian theory holding the belief that government's role in the economy is imperative and affect businesses in different ways including the making of strategic business decisions. While the principal focus of Keynesian theory is based on promoting capitalism, the classical perspective is based on the assumption that free market economies should be allowed to regulate themselves without the intervention of the government("Contending economic theories: neoclassical, Keynesian, and Marxian," 2013).
Therefore, there is an evident interplay of the role of self-interest and government intervention in the business processes and the economies involved altogether. The Keynesian theory incorporates the influence of consumer behavior in the economy and at different economic times. For example, based on this theory, consumers tend to purchase more when the economy is performing well. Therefore, in the Keynesian perspective, government intervention in price determination is key and cannot be compromised. Concerning future variability and market predictability, the Keynesians focus on short-term analysis while the neoclassical theory focuses on the long-term problems that affect the economy. References Contending economic theories: neoclassical, Keynesian, and Marxian. Choice Reviews Online, 50(09), 50-5121-50-5121. Alexiadis, S. It comes in handy in exploring how optimal trade policies are achieved among nations based on their production differences.
Based on the application of the canonical Ricardian model, it makes it quite simple to illustrate how optimal trade taxes and other important theory components can be uniformed in the context of export and import goods in international trades (Davidson 342). Precisely, this refers to a situation where one country can produce a product or a service at a lower opportunity cost than the other country, which means the cost of production of two different countries, will be very different. This might happen due to factor endowments or technological advantages that some countries have in the production line. This theory also suggests that countries that there will be an increase in economic welfare for countries which specialize in producing goods and services where they have lower opportunities in.
• Comparative advantage is not a static concept This theory might change over time. Resources such as non-renewable resource can change slowly with time by running low, raising the cost of production and lowering the comparative advantage of the affected firm or the gains from the international trade. Ricardo also neglected this, which is very unrealistic. • No similar taste This is very unrealistic as tastes are different in different countries due to different incomes categories or brackets. Taste also change according to the growth of an economy, endowment factors, and technological developments of its trade links with other interested countries. " OECD Trade Policy Papers, 2011. Davidson, Louise. "A Post Keynesian View of Theories and Causes for High Real Interest Rates. " Money and Employment, 1990, pp.
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