Economic policy

10 Key excerpts on "Economic policy"

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  eBook - PDF

  Comparative Public Policy

  • Anneliese Dodds(Author)
  • 2018(Publication Date)
  • Bloomsbury Academic

    (Publisher)

  8 Economic policy Economic policy is often separated from broader discussions of public policy, due to disciplinary barriers between economists and policy analysts. Yet, in all devel-oped nations, ‘economics is married, if only at common law, to politics’ (Dahl and Lindblom, 1976 : xlv). This is, first, because of the continuing influence of states on economic activity, both within and beyond domestic borders. The extent to which competitive markets can arise, consolidate and grow in the absence of (pre-dominantly state) authority has preoccupied political economists for decades (see Hayek, 1988 ; and Polanyi, 2001 [ 1944 ], for contrasting views). Regardless of this, it remains indisputable that, even in those nations traditionally viewed as following a ‘laissez-faire’ approach to Economic policy, governments and their bureaucracies play an essential role in funding, controlling, organizing and informing economic activity. As this chapter will show, this remains the case despite the influence of globalization. More than perhaps any other area of policy, Economic policy decisions can have wide repercussions on other policy areas. This is because successful (or unsuccess-ful) economic policies can increase (or reduce) government capacity to finance other policies, by impacting on the ability to raise revenue through taxation or borrow-ing. Some have argued that Economic policy also differs from other types of policy because its goals are almost universally accepted, as well as the means to achieve them. For these theorists, ‘full employment, stable prices, and steady levels of eco-nomic growth’ can be readily measured and are generally supported as policy aims (Heidenheimer et al., 1990 : 134). Others would suggest that whilst ‘[o]ther things being equal’ such goals are indeed ‘preferred’ by society, in practice, ‘these goals are not all positively related’ (Keech, 1980 : 345).

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  Workbook in Introductory Economics

  • Colin Harbury(Author)
  • 2014(Publication Date)
  • Pergamon

    (Publisher)

  CHAPTER 8 Economic policy (This chapter is concerned with questions of Economic policy and employs analysis treated earlier in the book. Some major issues are brought together here, but the reader should refer back to previous chapters for fuller treatment of particular matters and for additional questions and problems.) The activities of government are not confined to economic matters though the State has certain functions which are essentially economic. The scope of government intervention has increased enormously during the present century in the U.K. economy, as elsewhere, as most western countries have changed from being predominantly free-market to become more mixed-type economies. The economic functions of the modern State may be described in conjunction with the objectives of Economic policy. Several goals, or targets, can be distinguished — economic growth, full employment, stability of the price level, efficient allocation of resources and an equitable distribution of income and wealth. Other goals may be implied by these (e.g. raising productivity); they may be specific to a particular country (e.g. population control); or they may secondary goals in the sense that they are necessary for the achievement of primary goals (e.g. the balance of payments). The setting of goals is a political matter and the economist's role is to give advice on policies likely to achieve them efficiently. It is not uncommon for economists to differ on questions of Economic policy. Political views apart, the reasons may be found in disagreements about how the economy works and on the effects of alternative policies. Moreover, it is no easy political task to set national objectives, several of which may not be mutually consistent. A policy may be successful with respect to one goal at the expense of moving away from another.

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  Government and Business

  American Political Economy in Comparative Perspective

  • Richard Lehne(Author)
  • 2012(Publication Date)
  • CQ Press

    (Publisher)

  chapter 10 Business and Economic policy economic policies that produce robust growth with high employment and low inflation are cheered on all sides. They are associated with rising personal income and improved living standards for citizens, as well as high popularity ratings and increased reelection chances for incumbent officeholders. Economic policies also help determine corporate profits and prospects. They set the tax rates paid by businesses and affect the quantity of goods and services customers can purchase. Economic policies influence the cost and availability of credit, and this, in turn, guides business decisions to invest in new plants and equipment or delay initiatives until conditions are more favorable. Government policies are also a factor in setting currency exchange rates, which help determine whether a company succeeds at selling its products globally or faces intensified competi-tion in its domestic market. The single most significant development in U.S. public policy since World War II has been the popular acceptance of government responsibility for main-taining the health of the macroeconomy —meaning the economy considered in its totality. Although the American tradition still respects markets, business orga-nizations, and individual choice, government is now expected to ensure eco-nomic growth, maintain high employment rates, and prevent excessive inflation. When an economy is in recession, economic activity declines and production falls, the need for workers decreases, incomes drop, consumption is reduced, profits decline, and demand for government services grows. Furthermore, reces-sions are now political as well as economic events. They are usually laid at the feet of incumbent officeholders, especially presidents, and taken as evidence of an administration’s failure to manage policy effectively.

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  The Logic of Congressional Action

  • Rebecca West, Bernard Schweizer(Authors)
  • 1993(Publication Date)
  • Yale University Press

    (Publisher)

  In these two chapters I assume that practically every policy that Con-gress considers has both a macroeconomic component and a non-economic component. The macroeconomic component is the total effect that a policy would have on economic growth, unemployment, and infla-tion, both in the short run and in the long run. The noneconomic com-ponent includes all other effects. Thus, a billion-dollar program to train high school dropouts to hold semiskilled jobs has several possible eco-nomic effects—contributing a billion dollars to the deficit in the short term, decreasing unemployment by some fraction several years down the line, and possibly stimulating economic growth and decreasing the deficit in the long run—in addition to the obvious noneconomic effects. These two components then give rise to two types of policy decisions: explicit Economic policy and derivative Economic policy. An explicit Economic policy is a policy that someone proposes in an effort to solve a specific macroeconomic problem. The economic component of the pol-icy provides the impetus for action. Explicit economic policies include fiscal policy, monetary policy, wage and price controls, investment tax credits, countercyclical public works, or a revision of the tax code to stimulate work, savings, or investment. A derivative Economic policy is a policy that someone proposes to ameliorate some other condition, al-though it also has macroeconomic effects. For these policies, the non-economic component provides the impetus for action. Derivative eco-nomic policies include all expenditure programs, all attempts to modify the tax code to achieve noneconomic goals, and all regulatory or incen-tive programs that unintentionally alter the way individuals work or save or the way firms invest. The politics of Economic policy differs significantly depending on whether Congress is considering explicit Economic policy or derivative Economic policy.

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  The Economics of Brexit

  A Cost-Benefit Analysis of the UK's Economic Relationship with the EU

  • Philip B. Whyman, Alina I. Petrescu(Authors)
  • 2017(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  5 There are other Economic policy measures that could be taken to reinforce this package. For example, the government could consider introducing a fiscal inventive to boost productive investment, such as a tax allowance or support for R&D. Particularly if this incentive were to be time limited, so that qualifying investment would have to take place 8 Economic policy Considerations 267 within the next few years, this could encourage firms to bring forward investment rather than defer decision-making. In addition, the macro- economic stance of the government is particularly important in creat- ing the parameters within which firms make investment decisions. If the economy is growing at or above trend, firms are more likely to invest as they believe they can sell their products. Indeed, it is the expecta- tions held by business people of future profitability that predominantly determines present investment, whilst realised profits largely finance this new investment (Kalecki 1971; Arestis 1989: 614). Hence, if macroe- conomic policy focuses upon promoting growth, it is more likely that investment will be forthcoming as business people will lose out if they fail to invest in new products, processes and technology, in order to take advantage of favourable market conditions. This latter policy stance is particularly important for that proportion of investment which is not financed through borrowing from financial institutions or through equity markets, but rather financed through retained earnings. Medium Term—Economic Regeneration There are three elements to a medium term redesign of Economic policy, namely: 1. Macroeconomic management capable of facilitating economic regen- eration, promoting economic growth and full employment. 2. Competitive exchange rate management to offset any increase in trade costs with the EU, whilst facilitating a long term objective of eliminating the current very large trade deficit and restoring trade balance.

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  The Path to a Modern Economics

  Dealing with the Complexity of Economic Systems

  • Henning Schwardt(Author)
  • 2017(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  The danger they perceived 5.7 Policies Concerning Resource Utilization in Economies 293 from public knowledge of potentially helpful more active economic policies, to result in an overextension of interventions, has guided their public stance there. It has, however, nothing to do with their economic analyses, and everything to do with their political perception. Faith in a specific kind of market system is in fact the single antidote to influence- peddling and distortions of the economic system for private gain. By assumption, competition at the individual level offers the simplest and best solutions. II Considering the possibility of unemployment as an equilibrium state for economies, policy proposals can take on different shapes. Nominally distinguishing productive and monetary sectors allows equilibrium interest rates at which investment is too high for full employment. Importantly, the economic system may come to a rest in a state of unemployment that persists, without competition and market forces at the microeconomic level bringing it back to the full employment equilibrium. Resource employment can be increased here through policy measures. Government spending can bring idle resources into the economic sphere, as might a stimulus to private spending, for instance, through tax decreases. The former option may still result in a partial crowding- out, though, as to maintain government spending, its borrowing may have to be increased, reducing available investment funds under this perspective. Monetary policy that leads to changes, notably drops, in the interest rate may stimulate investment spending. A preference for mone- tary policy here derives from the fact that it does not displace private activity, as fiscal policy measures do, but rather works through changing incentives for private activity. The demand for money depends on the overall economic activity here, and an increase in activity increases the interest rate for a given money supply.

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  Economic Policy in Britain

  • Wyn Grant(Author)
  • 2017(Publication Date)
  • Red Globe Press

    (Publisher)

  3 Economic Theory and Economic policy Introduction This chapter reviews some of the theoretical debates that have been influential in the discussion of Economic policy, with the underlying assumption that it is important to talk about the ideas that have influenced Economic policy. As Keynes argues (1936, p. 383) 'I am sure that the power of vested interests is vastly exaggerated, com-pared with the gradual encroachment of ideas.' The market and the state One of the central theoretical tasks in any discussion of Economic policy is seeing whether any principles can be identified that might determine the proper boundaries between the market and the state. The ascendancy ofneo-liberalism in the last quarter of the twentieth century saw a shift in the boundary line in favour of the market mechanism. Indeed, as classic interpretations of Marxism diminished in popularity, sometimes seeming to increase the sect-like character-istics of some of the doctrine's adherents, critics of the effects of an unrestrained market increasingly grouped themselves around inter-pretations of Polanyi's (1944) work. His 'central proposition [was] that a self-regulating market that makes the rational pursuit of economic gain the only maxim of human action, will ultimately destroy its own human, social and natural conditions' (Streeck, 1997, p. 207). As human beings, our roles as produ=s and con-sumers are important ones, but we also have other roles which may come into conflict with the logic of an economic analysis based on self-regarding behaviour. At the begiuning of the twenty-first cen-65 66 Economic policy in Britain tury, this is often expressed by reference to Oscar Wilde's comment that 'we know the price of everything, but the value of nothing.' Given the ascendancy of advocates of organized (sometimes called 'Rhineland') capitalism among academic analysts, it is well to pause to consider some of the benefits ofa freely operating market mechan-ism.

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  Handbook of Public Policy in Europe

  Britain, France and Germany

  • H. Compston(Author)
  • 2004(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  This has involved the transfer to the EU of responsibility for most credit and exchange matters, especially Euro exchange rate policies and determin- ation of interest rates. In addition, the EU has implemented deregulatory and open market policies across sectors that were crucial to the implementation of 80 Economic policy traditional macroeconomic policies such as price controls and regulation of monetary and financial markets. This development has limited to a great extent the scope of the macroEconomic policy measures available to the French and German authorities. Since 1997 monetary policy in Britain has been the responsibility of the Monetary Policy Committee of the Bank of England, which sets interest rates. The decision to move the control of such an important policy instrument from the Government to the central bank represented a fundamental change in the conduct of Economic policy. It was intended to shelter interest rate decisions from short- term political pressures and hence to make them more credible in the markets. Both the euro and the pound are floating currencies whose value responds to transactions on the foreign exchange markets. Governments still have a capacity to intervene on the markets by buying or selling currency to increase or reduce its value. Exchange rate policy is used less actively than it was in the past, but there is still a role for the management of currency values. Fiscal policy is concerned with providing public infrastructure and goods and services. This might involve the use of government spending and taxation to affect the level and composition of aggregate demand in the economy. Another way to see it is in terms of the manipulation of the relationship between expend- iture and receipts to achieve economic objectives. Thus, if the economy is growing too fast, taxes might be increased and government spending reduced. Any discussion of fiscal policy in Germany has to take account of the coun- try’s federal structure.

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  American Economic Policy in the 1980s

  • Martin Feldstein(Author)
  • 2007(Publication Date)
  • University of Chicago Press

    (Publisher)

  David Richardson remarked that short-term expediency can sometimes lead to bad long-term policies. He emphasized the point in Frankel’s paper that the temporarily large trade deficits in the early 1980s had resulted in a 1988 trade bill that may do long-term damage to U.S. trade policy. 6 Economic Regulation 1. Paul L. Joskow and Roger G. No11 2. William A. Niskanen 3. Elizabeth Bailey 1. Paul L. Joskow and Roger G. No11 Deregulation and Regulatory Reform during the 1980s According to political and journalistic rhetoric, the United States relies on a market economy to allocate economic resources. Thus, the forces of supply and demand, largely unfettered by government intervention, are regarded as determining the quantities, qualities, and prices of goods and services that are produced in the domestic economy. The roots of this belief probably lie in two distinctive features of the US. economy: (i) the extent of private ownership of capital combined with relatively little public (nationalized) enterprise and (ii) the absence of strong, centralized economic planning. Nonetheless, this common belief is largely a myth. Through civil law and regulation, federal, state, and local governments have a substantial effect on almost all industries. Civil law limits property rights, defines contractual obligations, and sets quality standards for goods and ser- vices through tort law. Regulatory policy takes two general forms. “Economic” regulation controls profits, sets prices, and determines who can participate in a market or use a particular resource. “Social” regulation controls polluting by-products of production, sets health and safety standards for products and workplaces, restricts the content of information provided by sellers through advertising and other means of describing products to consumers, and estab- lishes requirements to protect buyers from fraudulent, discriminatory, or in- competent behavior by sellers. All these policies profoundly affect prices, 367

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  Public Sector Economics

  Made Simple

  • D. I. Trotman-Dickenson(Author)
  • 2014(Publication Date)
  • Made Simple

    (Publisher)

  The fiscal, monetary and incomes and prices policies of each country have international repercussions. Summary Fiscal Policy to Stabilise an Economy 247 Hirsch, F., and Goldthorpe, ed., Political Economy of Inflation, Harvard University Press, Cambridge, USA, 1978. Hockley, G. C , Public Finance, Routledge and Kegan Paul, London, 1979. Llewellyn, D. T., et al, The Framework of UK Monetary Policy, Heinemann Educa-tional Books, London, 1982. Musgrave, R. Α., and Musgrave, P. B., Public Finance in Theory and Practice, McGraw-Hill, New York, 1980. Peacock, A. T., The Economic Analysis of Government and Related Themes, Martin Robertson, Oxford, 1979. Prest, A. R., and Barr, Ν. Α., Public Finance in Theory and Practice, Weidenfeld and Nicolson, London, 1979. Sandford, C. T., The Economics of Public Finance, Pergamon Press, Oxford, 1981. Samuelson, P. Α., Economics, McGraw-Hill, London, 1980. Tylecote, Α., The Cause of the Present Inflation, The Macmillan Press Ltd., 1981. Exercises 1 Consider why there is a need for a fiscal policy to stabilise an economy. 2 Suggest why fiscal measures may fail to stimulate economic activity. 3 Explain how income tax has a built-in stabiliser. 4 Outline a fiscal policy to achieve an expansionary effect and the problems involved. 5 Suggest how a prices and incomes policy can be used to reinforce fiscal policy to create a contractionary effect. 6 Distinguish between the two types of inflation and suggest appropriate fiscal measures to deal with each one. 7 Why does stagflation present such a serious problem for the chancellor of the exchequer? 8 Outline a policy for controlling the aggregate demand at a time of economic boom. 9 Why are capital taxes of little use in the controlling of an economy. 10 'Monetary policy and fiscal policy are not alternative but complementary policies.' Comment on this statement. 19 Full Employment Fiscal policy to maintain full employment is equivalent to a policy to prevent unemployment.

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