Q. 1
At the heart of Edmund’s proposal is to empower capitalism by way of encouraging the disadvantaged to not only work but also increase their level of self-esteem, as well as, making these people more self-supporting. This particular proposal can be evaluated on a set of perspectives. One of these is the market incentives. Usually, a person will be motivated to take up a job opportunity that provides the most appealing incentives. Edmund’s proposal is incentive-oriented. As a recap, according to the economist, the credit would start at three dollars an hour for the worker whose private production is equivalent to four dollars per hour. Clearly, this is a market incentive and a worker from the disadvantaged group is likely to take up such an option. Therefore, if this solution is implemented, there is a high possibility that a greater number of the members of the disadvantaged groups will secure employment. The second factor that can be used to evaluate Edmund’s proposal is the ten principles of economics, and in particular, the response of people to incentives. As explained above, the same logic applies; people tend to respond to employers who provide better incentives. For instance, an applicant will likely seek an employer who provides free housing facilities rather than the one who does not. Even if the level of pay is low, the fact that some of the costs are catered by the employer necessarily means that the worker will lead a more self-supporting life.
The proposal can also be evaluated, based on the work and current welfare programs in America. At present, the American welfare programs usually provide benefits to low-income families and individuals. Given the sustaining benefits provided by the welfare programs, it follows that the majority of the disadvantaged people do not aspire to employment. However, if the employment sphere resembles that proposed by Edmund, the disadvantaged persons would be motivated to seek employment rather and continue depending on the welfare programs. Overall, it is right to say that Edmund’s proposal would give rise to desirable changes in the current society.
Q.2
Foremost, it is of central importance to define investment capital. According to Phelps (2007), investment capital refers to the total resources, mostly in the form of finances, which both the debt-holders and shareholders have invested in an entity. When an investor intends to establish a capital-intensive venture, he or she has to seek the initial capital from the shareholders. However, the investor is not supposed to use this capital for the production of goods or services. Rather, the capital is supposed to sustain the business throughout the business lifecycle. There are some ways that this capital this capital can sustain the business. One of these is the acquisition of new technology. According to Phelps (2007), the nature of the investment capital will determine the kind of the technology to be implemented in the business. Usually, investors, especially those that are seeking to transfer technology, will look for a business that will deliver the best outcomes for them. They mostly focus on the investment capital. If they deem it to be healthy, they are likely to lay their trust in such business. The same can be said about the issue of cost reduction especially through the use of new production methods. Most investors believe that business organizations that have a greater level of investment capital will be in a position to implement a better system, one that is unique to other entities. This view is shared by Shah (2009), who purported that an entity that has a desirable level of capital investment can attract a greater number of investors who have a unique approach to business. If a business is able to attract effective or efficient business practices as a result of their desirable investment capital, they are more likely to achieve cost efficiencies. The case of the interest rates follows the same trend. As such, with a higher or a desirable investment capital, it is likely that a business will be provided with appealing interest rates. Take an instance of credit facilities. If a credit institution finds out that a certain business has a recommendable investment capital, it will be motivated to provide credit as opposed to a business whose investment capital is questionable. Also, a credit facility will seek to negotiate the interest rate with business with a greater level of investment capital as opposed to a business with a lower level.
Q.3
The very first argument for the trade restrictions is the notion that such limitations tend to prevent what is known as dumping in the domestic or the local market. In most cases, the issue of dumping usually takes place when the foreign investors avail their products at prices, which are lower than the local production. The aim is often to drive the local competition. The very second argument for trade limitations is that the foreign productions often assist the infant businesses or industries. When new industries emerge, they are usually very small and tend to enjoy diseconomies of scale. As a fact, trade restrictions ought to be imposed in such a manner that they protect the infant industries from the competition posed by the foreign forces. The exists in the knowledge of the economists that the long term average cost curve usual slopes down at first until the point in which the marginal line merges with the average cost graph. When the average costs are high, especially at the point where the new or the infant industries are exposed to the external or the foreign competitors who seek lower costs, new businesses are forced to close down. Such argument is of huge interest the economists.
Q.4
In my own opinion, the combination of the free-market capitalism and the government intervention were responsible for the global financial crisis of the 2007-2009 crises. To argue for this particular position, it is of central position to identify the causes of the crisis, the steps that the private and the public sector took to solve it, and the strategies that should be adopted to prevent a similar issue into the future. According to Shah (2009), the private sector was faced with excessive private debts, a thing that was mostly triggered by the eased credit availability and essentially lowers levels of interest rates. According to Shah (2009), these rates of interest facilitated the growth in the levels of debts by the private businesses. Most private businesses took up loans with the aim of buying more expensive mortgages and housings. However, these businesses defaulted on these loans. This was followed by a problematic governmental intervention. According to Chossudovsky (2007), the Fed the Fed instituted an interest rate, which was below the original monetary guidelines. These guidelines stated that the most appropriate policy was to be based on the previous experiences; maintaining the level of the interest rates that did work well in the previous two periods instead of lowering the rates. However, the government chose to produce an exceeded level of monetary outcomes, which in turn led to growing governmental spending. This, according to Chossudovsky (2007), was not the intended outcome. In this case, it is right to say that the public and the private sectors played a core role in the acceleration of the global financial crisis.
- Chossudovsky, M. (2007). Global Financial Crisis. Economic and Political Weekly, 2794-2796.
- Phelps, E. S. (2007). Rewarding work. Harvard, UK: Harvard University Press.
- Shah, A. (2009). Global financial crisis. Global Issues, 25(2), 23-24.
