Question

a. Advance at least four (4) arguments in favor of economic development planning.

b. What is market failure?

c. Explain the risk and poverty theories of child labor?

Answer 1

a] The following are arguments in favour of planning:

1. Optimum Use of Resources:
2. Rapid Economic Development
3. Economic Stability
4. Balanced Growth
5. Better Solution of Basic Problem
6. Right use and Conservation of Natural Resources

b] Market failure is the economic situation defined by an inefficient distribution of goods and services in the free market. In market failure, the individual incentives for rational behavior do not lead to rational outcomes for the group.In other words, each individual makes the correct decision for him or herself, but those prove to be the wrong decisions for the group. In traditional microeconomics, this can sometimes be shown as a steady-state disequilibrium in which the quantity supplied does not equal the quantity demanded.

• Market failure occurs when individuals acting in rational self-interest produce a less than optimal or economically inefficient outcome.
• Market failure can occur in explicit markets where goods and services are bought and sold outright, which we think of as typical markets.
• Market failure can also occur in implicit markets as favors and special treatment are exchanged, such as elections or the legislative process.
• Market failures can be solved using private market solutions, government-imposed solutions, or voluntary collective actions.

​​​​​​​c]Child labour as a result of poverty is one of the most common theories about the causes behind underage work. A majority of studies in developing countries show that poor families put their children in child labour more often than families in a better economic situation. Increase of the household income is one reason but it is also a safety strategy to even out the risk of losing economic income, for example with the loss of an adult income earner or a failed harvest. According to ILO child labour commonly may represent around 20 per cent of the household income, and as poor families spend the majority of its income on food, consequently the children’s incomes are crucial. In many households not all income is equally allocated to meet basic needs. Income earned by the mother of the household is more likely to be available for the family than income earned by the father. Children’s earnings given to mothers may therefore be more important for the family than the earnings gained by the father. It is common that children are think about such factors, they are fully aware of their work as an important part to support their family.

Economic dependence of households on the work contributed by their children varies extremely, ranging from almost none in industrializing countries to nearly total dependence in families with an absent or disabled adult – common in many African countries being desolated by HIV/AIDS. Boyden J, Ling B, and Myers W indicate that the fundamental importance of child labour as a result of poverty is so widely accepted and well demonstrated that there is no need to question the theory. But, there exist disagreements about to what degree poverty is fundamental to child labour – if poverty was the sole determinant for child labour, the highest rates of child labour would be found in the poorest parts of the world. This is not always the case. The relationship between child labour and poverty is varied, vague and indirect. If poverty would be the only determinant, the same patterns would be found over the world, but they are not. In rich countries it is often the opposite; children from high-income families are more likely to work. The explanation is that children from wealthier families have more work opportunities and are less exposed to ethnic and racial discrimination. A Brazilian study of economical active urban children compared a more industrialized wealthier area in south with a less industrialized, poorer area in north. The finding was that children in the wealthier south were much more likely to be involved in labour than were the children in the poorer north. The best explanation was that the well-situated environment in south provided more labour opportunities for children. Even if more children might have been looking for work in the northern poor area they could not find it. This is an example of the fact that increased prosperity in an area will not automatically reduce the prevalence of child labour.  

Children from wealthier families are sometimes more likely get involved in child labour as children of families owning land or small business may work more than children from poor families without any productive assets. It is common both in industrialized and developing countries to find children working in family business generating livelihoods well above the poverty level. In fact, most child labourers work within the home or in a family enterprise. Poverty itself may be an obstacle to work opportunities, for example it can limit the ability to pay for travel to and from the job-site

Most common is to think that poverty is an explanation for the flow of children in to the labour market, but poverty can also be an important factor regarding the demand for child labourers. Employers with a bad economical situation often turn to child labour with the wish to keep their cost to a minimum, and poor children come cheap. Poor children have less education, fewer employment options and are less aware of their rights. The globalization of the market puts pressure on the prices and in the search for the lowest prizes child labour seems to be the cheapest option.