Humans Are Hard-Wired for Trading Failure - Research Paper Example

The paper "Humans Are Hard-Wired for Trading Failure" is a wonderful example of a research paper on macro and microeconomics. Man has indulged himself into the trade since time immemorial. Trade, however, has not only restricted itself into commodities, rather its boundaries have expanded even to that of labor. Exchange cannot only take place between two people possessing commodities with a physical presence but, there are also instances from history which say that people have traded their labor power with goods for sustenance. In fact, the high demand for labor, at one point of time, led to the formation of an organized market for labor which also happens to abide by the market mechanism rules. Labor market too has an equilibrium price for a given volume of the labor force. The problem arises, however, when this price is regulated by some external power rather than left with the market forces. Though the commodities in question are after all human beings who cannot be treated as ordinary goods, regulating the labor market too might lead to long-lasting problems.

Consumers must be the decision-makers

South Africa is a nation with high development prospects; it even has many investors ready to venture within its territory. Most of the investors interested in the South African market are those wanting to enter either the heavy capital industry or the mining industry. Both these industries require a huge amount of labor to accomplish their production activities efficiently. Moreover, the paper pulp industry is also quite prominent in the nation. All these commodities are heavily exported throughout the world to help the nation earn export revenues which finance for their demand for imports. Moreover, entry of foreign business houses within the territory might bring with it potentials of further FDI, which cannot be regarded as anything short of a blessing for the nation. Thus, the government must take initiatives to smoothen the availability of production resources to these industries, so as to pacify them and attract more of their kind.

Government Failure is worse than Market Failure

Even though South Africa is a highly populated nation with an abundance of labor to be used as units of production, most of the industries are demoralized due to the prevalence of stringent labor laws within the nation. The labor laws being fixed by the South African government include the setting up of a high minimum wage, which must be adhered to even during times of financial crisis. Moreover, the government also has barred retrenchment of excess labor once they have been recruited. Such policies are restrictive enough for larger companies to operate their business in the economy, leaving apart the smaller ones. The government justifies its position by stressing upon the fact that such a policy has been implemented to reduce the rate of unemployment existing in the nation. However, what the national government fails to recognize is that the greater the constraints are, lower will be the attraction for investors of setting up their business in the nation. Continuation of such policies might even drive out the investors, thus rummaging down with it the government’s intentions of ensuring economic development and growth (Blumsohn, “Gordhan's growth pie in the sky without free market”, par. 3)

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