Critical Analysis of a Macroeconomics Article - Essay Example

fiscal, monetary and international trade policy) to limit the scale of economic activity within the regenerative and waste assimilative capacities of the ecosphere. The usage of government’s rate of spending through its fiscal policy and its instrument to control money supply through its monetary policy does not provide a viable solution for the dilemma of ecological sustainability. So much so with international trade policy which only enhances the competitiveness of its domestic industries abroad which is not always desirable for the environment.

The market cannot be left by itself to let its dynamics correct the inequity and ill effect of having an economy that consumes more than the environment’s regenerative capacity. Such, the article suggested ways to to avoid further ecological degeneration by modifying aggregate private sector spending through cap-and-trade system that will penalize environmentally hazardous activities. It also suggested the idea of a steady state economy where growth is commensurate to the environment’s capacity to replenish itself. II. Theoretical Analysis of the Article A.

Fiscal Policy – Fiscal Policy is typically used by central government to pump prime the economy through its expenditures. It is used to encourage industry and create jobs during economic downturn funded by its fiscal collection through taxation. The article however acknowledges the fact that the typical function of Fiscal Policy satisfies only economic criteria and not the biophysical criteria of the environment and as such, its typical usage cannot be utilized to remedy the sustainability dilemma of resources.

A variation of this Policy Instrument however can be used to limit economic activity that strains the environment. Through cap-and-trade system, it may be able to discourage and limit ecologically straining economic activities by penalizing through reformed taxation those economic activities that depletes our natural resources and pollutes the environment. B. Monetary Policy – Monetary Policy or the government’s instrument to control the supply of money circulating in the economy can neither address ecological degradation.

It can encourage private enterprise spending by “loosening” its interest rates and encourage economic activity which may in fact even be harmful to the environment as it stimulates expansion, which is the biggest threat to ecological degradation. C. External Trade Policy – International Trade Policy merely addresses the international competitivenes of domestic industries to be able to compete in the global market. But with the advent of globalization, government influence in international trade is slowly diminishing that to use this instrument to put limit on the expansionist tendency of the industry to effect diversity conservation is simply not workable. III. Significance of the Analysis A.

Society – Initiating a macroeconomic policy that is not expansionary will tremendously benefit society in the long-run. Imposing restrictions and/or limit to resource throughput within the environment’s regenerative and waste assimilative capacities will ensure ecological sustainability and availability of resources in the long-run. It will ensure the perpetual availability of resources to provide society’