Question

Give two reasons why future costs and benefits should be discounted when evaluating the costs and benefits of a proposed regulation.

Answer 1

Globalization advantages –

• Helps boost the average growth rate of the country’s economy through improving in allocative efficacy and efficiency of the resources
• It increases labor productivity and reduces capital-output ratio
• It makes way for eliminating in-efficiency in the production system.
• In its absence, makes the production system careless about cost-effectiveness
• Attracts foreign capital as well as foreign updated technology, improving the quality of production.

Disadvantages –

• Leads the way to redistribute the economic power at global level which leads to dominance of rich-powerful countries over poor nations
• Results in more imports than exports resulting in growing trade deficit and balance of payment issue
• Even though Globalization promotes technological adaption to increase productivity, much of it has resulted in loss of jobs.
• Small scale industries cannot withstand competition due to MNCs bought by globalization.