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INTERVENTIONIST AS POLICIES - Coggle Diagram
INTERVENTIONIST AS POLICIES
PROVIDING GUIDELINES & INFORMATION
-influence :arrow_up: wage costs/provide guidelines on setting of certain prices such as public transport & utilities
-promote certain behaviours or practices that can :arrow_up: efficiency & AS
-provide educational info to productivity, industry trends, employment, investment opportunities
-provide info on labour market trends & employment opportunities => improve efficiency of job search & :arrow_down: frictional unemployment
REGULATION & LEGISLATION
-directly control the level of prices & output
-influence the supply of FOPs
-price controls help to contain wage-push spiral
EXAMPLES:
-foreign labour policies
-legal working/retirement age
-birth control legislation
-regulations on land use or building development
-non-tariff protectionist regulations
-regulations on companies & businesses: affect risk-taking & supply of entrepreneurs
INCENTIVES
-examples of incentives: grants, subsidies, tax incentives
-given for diff purposes as part of influencing the aggregate supply
URBAN POLICY & INFRASTRUCTURE DEVELOPMENT
-physical infrastructure tend to be under-provided if left to the private sector cos SB>PB
-govt intervene directly to maximise the benefits obtained from the infrastructure
:arrow_up: productive capacity, attract :arrow_up: investments
-LRAS :arrow_up:
LIMITATIONS
Bureaucracy and corruption
-w/o profit motive, govt may not run nationalised companies as efficiently as a private company
-w corruption, govt failure can happen when authorities abuse their authority
Wastage of public funds
-subsidies and grants aim to influence economic decisions and AS, but may not have the intended effect
-unsuccessful attempt wastes the public funds spent
Workability and compliance
-business leaders and labour leaders have to give up their primary functions and max profits and higher wages
-may not comply
-expected little voluntary cooperation from labour and management
Allocative inefficiency and rationing
-product and resource prices must be allowed to fluctuate freely and fully w :small_red_triangle: market conditions=> interferes w effective wage-price controls
-rationing cannot be done cos cannot equate qty demanded and qty supplied => product shortages