The Avenues of Economics and Finance: a Satisfactory Solution - Research Paper Example

Tiebout Hypothesis Tiebout Hypothesis was propounded by Charles Tiebout, the renowned economist from America, in 1956. The Hypothesis explains about the scenario that results, when various provincial governments provide diverse types of goods and services for the general welfare of the public, along with varying tax rates. Tiebout states that, in light of this, people travel from one province to the other, until they find the one where the goods/services offered, even after considering the tax rates, provide them with optimal utility. Based on this hypothesis, it can be conveniently inferred that each province would be consisting predominantly of people with more or less similar financial capabilities. (SOURCE 1) This hypothesis by Charles Tiebout is not without many criticisms that were voiced against it and emanating from diverse sources of the field of economics. Probably, the most important of those (criticisms) is the fact that, the hypothesis is in total discord with the principle of equity. This principle emphatically states that equal opportunities of growth and prosperity need to be provided to all the people. And Tiebout Hypothesis is diametrically opposite to that, as it supports the presence of goods & services, and taxes, conforming to the monetary interests of a particular section of a province’s populace. The second criticism that has been leveled against the hypothesis is that, it has come to the assumption that people can conveniently keep moving between various zones, until they identify a province supporting their interests. The real life scenario is the testimony to the fact that, constant mobility for a substantial chunk of the population is not as easy as stated by Charles Tiebout. For most of the people, the financial implications of frequent travelling are beyond their means, not to mention the huge efforts and time involved in it. Another strong criticism that is leveled against Tiebout Model is that it in no way supports even minimal levels of efficiency, in terms of levels of cost. In a scenario pertinent to this model, as the number of people being benefitted by the goods and services registers a rapid increase, the rate of enhancement of related costs also displays a rapid rise. The obvious outcome of this being, a significant chunk of the province’s populace would be bogged down by the alarming high costs, and they would then resume their search for greener pastures (low cost zones). (SOURCE 1) Last but in no way the least, is the fact that the Tiebout Model fails to address the above-mentioned aspect of efficiency, from another angle. As the costs of goods and services display a rapid rise, it has been observed that many people would be compelled in migrating to other provinces that are commercially lucrative for them. In this context, it can be logically inferred that these migrants would also be inclusive of highly competent individuals who can constructively contribute towards the growth of any zone/province. That such a state of affairs, where many talented people leave for other places, is detrimental to the long term interests of the location concerned (zone/province) warrants no special mention. Senate Grants Approval for Consolidation of Local Governments In June 2009, the Senate granted approval for a legislation that aims at bringing about an effective integration of various levels of New York’s local government. This initiative was welcomed by many, as it is projected to enable a substantial drop in the tax rates of New York. The legislation would be simplifying the existing set of intricate laws that dwell on the manner in which government personnel or voters can integrate or dissolve villages, towns and the numerous special districts. As per the new law, a proposal of consolidation could be moved by signatures of just ten percent of people of the jurisdiction, who are eligible for voting. (SOURCE 2) Analysis from the Perspective of the Tiebout Model The aforesaid development in New York is in stark contrast with the model put forward by Charles Tiebout. This legislation, which focuses on the aspect of consolidation of local governments, adds further weight to the criticisms against the Tiebout Hypotheis, detailed earlier in this write-up. While elaborating about the Model, a mention of high costs was made, and this in fact is the unpleasant scenario that would be tackled by this latest legislation of New York. The integration that is to be brought about by this new Law would be drastically minimizing the tax rates, and in the process will be providing much needed solace to the denizens of the State (New York). Based on all this, it can be concluded without any hesitation that, as mentioned earlier, the Tiebout model does not hold good for most of the real world scenarios. Even apart from this latest development in the US, numerous regions of the globe are making efforts in the direction of combining various provincial governments under their purview. By this, the fact that the Tiebout Model of presence of many zonal government levels is in total disagreement with needs of the majority of the World’s population is being subtly reiterated. Hot Lanes Hot Lanes are the lanes that function along with the regular highway lanes, providing an option for a quicker means of travel. Vehicle drivers are enabled to use the hot lanes, on payment of a toll, whose rate varies according to the prevailing volume of traffic at the given point of time, and the kind of vehicle concerned. Based on regulations of the region, some vehicles are exempted from the payment of toll, and are permitted to use the hot lanes free of any charge. Vehicles that fall into this category may vary from region to region, but emergency vehicles are provided a free passage on hot lanes, everywhere. (SOURCE 3) Hot lanes exhibit high levels of success in addressing the problem of traffic congestion, and in providing lot of convenience to people who are in a hurry to reach a location. In the earlier related scenario where the concept of hot lanes was non-existent, people used to undergo lot of hardships in reaching their respective destinations. There are countless instances where, owing to traffic snarls, people missed important things such as business meetings, job interviews, etc, not to mention the plight of emergency vehicles such as ambulances. The presence of Hot lanes, by bringing about a decline in the rate of road mishaps, would be successfully addressing the vital issue of road safety. Now, it can be conveniently stated that hot lanes have made all the aforesaid unpleasant issues as things of the past. Owing to their (hot lanes) presence, people are being fully facilitated in reaching their respective destinations, even without traces of any sort of impediments; leave alone a major traffic jam. The amount collected as tolls through HOT Lanes would be used for providing added amenities, with not the least among them being an improved system of public transportation. (SOURCE 3) Also, the system of collecting toll for usage of hot lanes ensures that only people who are genuinely having the need of quick travel use the lanes. Additionally, by means of electronic displays, the drivers are informed about the then prevalent toll rate. Based on that, they are enabled to arrive at a decision on whether or not to use the hot lane. Personnel are present on hot lanes to ensure that the flow of traffic is smooth, at any point of time (SOURCE 3) Successful Allocation of Resources in Housing Sector – A Challenge When compared with other sectors, the successful allocation of resources in the housing sector is rather tough, to say the least. On one hand, there is huge demand in the urban housing market, attributable to the trend of huge migration of rural dwellers, to urban locales. And on the other hand, the sector is being severely bogged down by problems such as inadequate capital and shortage of workforce, amongst others. (SOURCE 4) Another major impediment preventing apt allocation of resources in the sector is that, the housing market’s search for the equilibrium pertinent to it is yet to be successfully completed. Even experts in the avenues of economics and finance are unable to arrive at a satisfactory solution to address this issue of equilibrium. (SOURCE 4) Last but not the least is the fact that the World is yet to fully recover from the recent economic recession. And the same is seriously hindering the actions of all institutions and individuals, who are relentlessly striving to ensure that resources are aptly allocated in the sector. (SOURCE 4) Conclusion All the three topics covered in this write-up are vast, and there is a possibility that some key points might have been omitted due to paucity of space. Nonetheless, a sincere attempt has been made to at least briefly dwell on all relevant points, which are of utmost importance, in all the three subjects discussed. SOURCES 1. Center for Spatially Integrated Social Science, csiss.org/classics/content/43, Internet, Chris Stoddard, ND. 2. The New York Times, nytimes.com/2009/06/04/nyregion/04consolidate.html, Internet, June 4th 2009, The New York Times. 3. Virginia Hot Lanes, virginiahotlanes.com/documents/transurban%20FAQ-HOT%20Lanes%20and%20Tolling%20061109.pdf, Internet, N.D, N.P. 4. ThinkMarkets, thinkmarkets.wordpress.com/2009/03/24/reflating-the-housing-bubble, Internet, Mario Rizzo and Joe Calhoun, March 2009 to December 2009. Read More