Question

Think of the different goals of policymaking: efficiency, growth, stability, and equity. Why do they often conflict? Why can an economy not achieve multiple goals simultaneously?

Answer 1

There are different goals of policymaking like:

1. Efficiency: This means that any activity should be done without the wastage of resources, money, time and efforts.

2. Growth: This means that the GDP of a country should keep increasing no matter what.

3. Stability: The economy should be stable in a way that there should not be any fluctuations in the form of recession or inflation.

4. Equity: The policy should be such that promotes fairness and equality among all its citizens.

It is not possible for a policymaker to achieve all of these goals simultaneously as one will definitely contradict the other.

Suppose, the policymakers are planning to increase the industrial area to a great extent by increasing the manufacturing units in order to increase the growth rate. But this action is leading to excessive deforestation. Since this is causing the wastage of resources to a great extent, it is not efficient.

Suppose government increases government spending and reduces taxes to bring equality among citizens. This might lead to an increase in inflation rates which brings instability in the economy.

The above examples and the definitions of each of the goals clarify the fact that it is not possible for the policymakers to achieve multiple goals simultaneously as one will contradict with another.