Question

why are governments in most African times make part of the problem of coordination failure rather than the solution? 10 points

Answer 1

Coordination failure is the recessions through the failure of firms and price setters. It suggests an efficiency-enhancing role for policy intervention. This failure arises because of strategic uncertainity, not because a conflict of interest prevails. Poor countries must specialize in standardized labour-intensive commodities. Little income countries may have a richer means of options if their labor force is reasonably well educated and skilled. The multiplicity of equilibria is due to a coordination problem inherent in acctivities that require specialized inputs. If no intermediate inputs are presently produced, there may be little incentive for any single firm to do so on its own. The economy may get stuck in a low-wage, low-tech equilibruim. An investment subsidy or a minimum wage policy can enhance welfare by moving the economy to a superior equilibrium. African times is a part of the problem of coordination failure rather than the solution because when the government interferes and there is speedy decline in the economic welfare and causes deficiency during the allotment of resources. So the government needs to break some kind of coordination among these different agents to make sure resources converge in an aligned way towards one particular goal.