Question

The economic environment in which businesses operate is obviously very important. So, it's no surprise that throughout history, philosophers and economists have proposed different ways to structure an economy. One way to think about these different systems it to imagine a spectrum between pure capitalism and free markets on one end and communism or so-called command economies on the other end. What role should the government play in an economy?

1.What role should the government play in an economy?

2. Are economic measures the only benchmark we should use to evaluate progress?

3. What are some of the key advantages and problems of different economic systems?

4. What are some basic principles that YOU would use to design an economy?

Answer 1

1. The role of the government in an economy is to correct the failures of market and bring social welfare. Roles of government include providing of public goods, imposing of competition and affecting externalities. The most important role is bringing stabilization and growth through maintaining steady growth, increasing employment scopes and bringing price stability. Adjusting the fiscal and monetary policies through managing of money supply in the economy will help in stabilization and growth in the economy.
2. Economic measures are not the only benchmark we should use to evaluate progress. Quantitative indicators have proven highly effective in drawing attention to the burdens of business regulation, identifying priorities for reform and communicating success and progress. The use of a common ‘scorecard’ also facilitates public, private consultation. Economic measures are benchmark information provider for establishing the priorities, monitoring progress and planning action in the economy. But only economic measures like market demand and supply, performance ratings and others are not only the benchmarks to be used for progress evaluation. Quantitative assessment, predictions, forecasts are used to evaluate progress.
3. The three economics systems are socialistic, capitalistic and mixed economic system. Socialistic economic system are centrally planned or authoritative economic system in which there is full control of the government for taking decisions about choosing resources, change implementation in the economy. Advantage of command economic system is that there is low unemployment and inequality. Lack of competition and efficiency are disadvantages of command economy. Capitalistic economic system is the free market economic system in which decisions of market demand and supply are done by people in that economy. Advantage of capitalistic economy is that there is no interference of government and market demand are main criteria for changes. Disadvantage of capitalistic economy is that there can be confusion and misunderstanding. Mixed economic system has both the free and command economic system. There is interference and control of the government. Advantage of mixed economy is that it enhances national production. Disadvantage of mixed economy is that there is very little scope of optimal use of resources and suffers from backwardness.
4. The principles of design economics starts with the overview factors which affects the facilities and the costs of externalities. Next, the discussion on the capital cost theory and the whole life cost (WLC) theory ensures effects of design decisions are considered totally. The theory of managing value focuses on the quality maximization for the design solution. Next step is to consider the relationship between economic cost and environmental costs. The relationship between construction cost and resource inputs are taken into account at last.