Free Essay On The Institutional Affiliation X
Questions & Answers
1. Why does government intervention in the economy appear necessary?
“Government is best that governs least” is the statement, which is popular among the supporters of the minimalist-government view or laissez-faire economy. However, to some extent government intervention in the economy is what a healthy society really needs, especially when the situation of market failure occurs. Indeed, there are certain areas where “an invisible hand of market” alone won’t do its best.
Firstly, the marketplace can’t provide the society with public goods (also known as collective goods), since it is practically impossible to exclude non-paying consumers from using these very goods, so private sector loses its main incentive to gain profit. It is government, whom we should be grateful for protecting sanitary and phytosanitary measures, national defense ensuring, air pollution control, to name just a few (Koven & Lyons, 2010, p. 32-34).
Secondly, government needs to have regulatory control over externalities, especially negative ones, to prevent imposing some negative effect on unrelated third parties. For instance, prescribed pollution charges and fines are high enough to encourage enterprises to implement required abatement measures. Furthermore, in case our rights have been injured by some company’s policy, we are free to sue for damages (Koven & Lyons, 2010, p. 34-35).
Thirdly, there is also a need to control natural monopolies, which may happen even in a competitive market environment. It is the result of state regulation that we don’t have to pay excessive prices for telephone and electric services (Koven & Lyons, 2010, p. 35).
Last but not the least reason I would like to name is information asymmetries. It is common in market relations that one party knows more than another, should it be debtor and creditor, or buyer and seller, or employee and employer. To make possible equal access to information the state can enact to disclose certain data in the interest of less informed party. For example, food producers must indicate product contents on the package, and employers must inform their potential workers about working environment, including health risks, if any (Koven & Lyons, 2010, p. 36).
2. How might bottom-up development strategies enhance economic development? Do you think these strategies lead to economic growth? Why or why not?
The bottom-up development (the demand-side perspective) aims at encouraging demand from consumers primarily by increasing their purchasing ability (Koven & Lyons, 2010, p. 40). The way how these very strategies may enhance economic development is as follows: higher earnings at low- and middle-income families → the families can afford more and will spend more → it will inspire private sector to produce more goods and provide more services. I believe the strategies implied can lead to economic growth when combined with some other instruments. In proof of this statement see the opportunities provided by the bottom-up approach (Koven & Lyons, 2010, p. 41-43):
3. Which model – old regionalism or new regionalism – would you use to revitalize the economy of Dayton, Ohio? Explain your response.
I would definitely use a new regionalism model to revitalize the economy of Dayton, as I share the opinion of Koven and Lyons that “new regionalism is believed to represent a qualitatively different way of thinking than old regionalism” (Koven & Lyons, 2010, p. 50).
As we know, the Dayton metropolitan area (also called the Greater Dayton) is one of the largest metropolitan areas in the state of Ohio. So, it would be really reasonable to make use of all benefits provided by new regionalism as compared with old regionalism. To explain my choice, see some progressive attitudes of this very model as follows:
New regionalism doesn’t tend to concentrate all powers in a single pair of hands; it is rather about empowering counties (their neighborhoods and communities) as well as the center. The aim is to get all levels actively involved in regional decision making. As a result, the Greater Dayton will have widely approved and accepted regional agenda.
New regionalism is likely to employ bottom-up development strategies which can help to build a mutual trust basis for regional development.
In a new regionalism model there is no focus on governmental hierarchy, this model focuses on cooperation and conclusion of interregional agreements as among equals. To my mind, such position correlates with a famous Latin saying, “Par in parem non habet jurisdictionem”.
New regionalism engages private, nonprofit and public interests, since it is acknowledged that building a competitive region is a shared responsibility of all mentioned sectors.
(Koven & Lyons, 2010, p. 50).
Koven, S., & Lyons, T. (2010). Economic development: Strategies for state and local practice (2nd ed.). Washington, D.C.: International City/County Management Association.
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