Market Failure from the Perspective of the Economist - Essay Example

Ethics Market Failure a) Define market failure from the perspective of the economist and government failure from the perspective of the political scientist (recall public choice theory). Market failure by definition is situation where markets yield an output of resources that is considered to be insufficient. This comes with its impacts on a social society and these can be classified into various forms: externality, monopoly, public good and information asymmetry. Government failure points to an imperfection in the performance of a government. It could be caused by government interference yielding more harm than good or it is passive with regard to a matter of importance to the society. Governments are expected to intervene in the case of market failure and efficiently solve the problem. Which definition best fits the policy problem of the law you are studying for your final paper? Explain why. Government failure best fits because it fails to provide a balance where the consumer and the producer mutually benefit from trade. b) Market failures are most commonly identified with negative externalities. Provide an example of this phenomenon as well as a pro and con of government regulation as a corrective measure. On the subject of externality there is the aspect of Negative Externality and it involves both the consumer and the producer who collectively neglect the environment and what implications their activities have on the environment. It could also involve one of the two parties leaving the other out of consideration; for example when a producer releases a harmful product into the market and it results into the death of a consumer. This is one scenario that has been satisfied by the tobacco company. The health effects (lung cancer) of smoking to both the active and passive smokers cannot be over emphasized. The medical bills that the smoker incurs in the course of treatment is substantial and then there is the pain endured during ones illness and the ultimate price is the loss of life. Regardless of these hazardous effects, the cigarette industry continues to thrive over financial gains from the sale of its product. In the United States, the Food and Drug Administration (FDA) has controlled the tobacco company through the regulation of their products. It has done this by: restricting the advertising and promotion of tobacco products and this has worked to promote healthy living since the public is less aware of the existence of the product. It has banned all tobacco products which are flavored like fruits and candy and this has made them less attractive to minors and individuals with refined tastes. The companies are barred from purporting any reduced risk products and this has played the role of reducing the number of new smokers or prospective ones. It requires the companies to fully disclose the health effects of their product, the contents and any changes they might have made; with this knowledge in the public eye, the consumers are empowered with information. The disadvantage that comes with these legislations is that the sale of the product is still legal so long as the relevant companies abide by them. The laws fail to do away with the product regardless of its adverse effects all they do is navigate around its existence, Tobacco Control Legal Consortium, June 2009 c) Lastly, provide an example of a public good and explain why it is framed within the theory of market failure. Be specific. Public good refers to the utilities that are offered through public funding because the market is unable to avail them, an example of such is public parks. This subject is grouped under market failure because it shows the impartiality of capitalism. Consumers are required to pay directly for the services they used. The use of such utilities is guaranteed by the taxes that the consumer pays. A problem that regards these public goods is that there is no guarantee for equality; there is a high possibility of right infringement. Equality is subject to an individual’s moral code. Public Policy a) Referring to the policy you are studying for your final paper, select one of the policy foundations as well as one of the policy types discussed in lecture that best describes the policy goal. This is the way forward through decision making of a nation, state or city. The foundations of public policy set apart what the government intends to do and what it actually does. In a multifaceted process, there is a number of key players who could be referred to as stakeholders who hold influence over the policy makers’ decisions. A regulatory policy best describes a multifaceted process that could be in the form of a customer oriented approach in social marketing. An example of this is an antismoking campaign. i. What are/were the political hurdles in passing the bill into law? Groups championing for the rights of smokers opposed the bill with claims that the health threats to non-smokers were exaggerated by the anti-smoking advocates so as to win the passage of higher taxes and bans with regard to smoking in public places. They also viewed it as a use of force by government since it curtailed the liberal freedoms of adult smokers. The general outlook is that the act is a pork-barrel legislation. ii. Identify the major benefit and major cost associated with this law. The major benefit of the law is that the liberal rights of non-smokers to enjoy clean air are not infringed upon by smokers in public places. On the downside, the law is continuously being challenged by activists who see a bias on the part of the government. An example of this is what activists term as lawsuit abuse. This is evident in the Master Settlement Agreement (MSA) of 1998 where Philip Morris and other lawyers settled a lawsuit by 46 states and five territories. This development led to the agreement of a $243 billion settlement to be paid over a period of 25 years by tobacco companies. This translates to an aggregate of $18 million per year and it is this debt that has been passed down to smokers by the companies in the form of amplified retail prices for cigarettes. iii. Is this law financially feasible – can it pay for itself? This law is not financially feasible because it limits the rights of smokers and the habit is therefore coupled with limitations and this in turn makes it less attractive. In terms of the taxes collected from tobacco companies, there is a decline due to the fall in the number of cigarette smokers. This reduction is reflected in International Journal of Environmental Research and Public Health, survey in April 2014 and is attributed to smoke free, tobacco free and nicotine free, electronic cigarettes. 81% of the respondents claimed to have quit smoking with the aid of electronic cigarettes. Chain smokers were the largest beneficiaries with a recorded 80% decrease in the number of cigarettes smoked per day. Taking 20 cigarettes per day to be the average number of cigarettes a chain smoker consumes, an 80% decrease cuts that down to 4 cigarettes per day. This success rate on active smokers when viewed from a public policy perspective deciphers to a reduction in smoking rates. However, there is no exception provided for in the act to set apart electronic cigarette smokers; before the law, they are also smokers and subject to its implications. c) American politics has always been about the competition of ideas about what people really want. Referring to the policy you are studying, identify the characteristics of whether your policy is liberal or conservative – or, perhaps it is neither. Explain. This is a conservative policy because it dictates to the public that they have to uphold a set of values or a moral code in their operations. They are moderated on the extent to which they can enjoy their freedom. Philosophy of the State a) How do the two philosopher’s visions of the social contract differ? Explain in detail In 1651 an individual by the name Thomas Hobbes published the Leviathan which is a summary of previous political ideas. The theories of the time stated that people followed the law and had regard for the government because it was God’s will that authority be obeyed. Hobbes questioned this hypothesis and refuted the claim that it was mere moral obligation that led people to have regard for the government. He assumed that all people were driven by motivation and self-preservation is the greatest kind of motivation. He gave an example of an individual at the sight of danger would result to fleeing and this is an impulse brought about by one’s need for freedom. Therefore in a free society anyone who would seek to impose leadership or barriers would be met with a conflicting society. He concludes that each individual gave up the right to preserve life for the sake of peace. Individual rebellions are punished to prevent the outbreak of a group rebellion. People abide by the law for the sake of self-preservation. John Locke later on debated that people were loving beings who knew the dangers of conflict and therefore avoided it. Therefore it is possible to govern them under stipulated laws which in turn safeguarded their right to acquire property. Punishment was offered to anyone who threatened the peace and the aim of this was to maintain the peace and not to prevent further unrest as Hobbes outlined. The purpose of a symbol of authority (government) is to safeguard the natural rights. In a situation where there is unrest or a protest the government has a mandate to control it so as to prevent lawlessness. To a degree, the present laws agree with both theories of the social contract. Does your law show evidence of Leviathan reaching into the American public policy domain? The law shows Leviathan reaching into the public domain as it is inclined towards Hobbe’s theory.s b) How did the Federalist Papers influence the ratification of the Constitution? The federalist papers are documents that defend the American documents. Their effect was felt though not on a positive note. They were meant for ratification of the Constitution in the state of New York however, their publication was hardly visible in the colonies and even after the publication two-thirds of the delegates in New York rose to oppose the constitution. The argumentative papers also seemed to have swayed very few and therefore had little impact as reflected by the lengthy time it took the convention to come to a decision regarding the matter, Derek Schutz, Volume 2, No. 2 (Winter 2011). What is meant by “if angels were to govern men …” The statement “if angels were to govern men …” shows that in a government there needs to be checks and balances to monitor the leaders who are prone to partiality because of their human nature and these are provided in the constitution. How does the U.S. government balance power? The United States government balances command through separation of power. The national and federal government are split into three divisions which are independent of each other; the legislature, executive and the judiciary. All the three divisions have separate powers and do not infringe on each other but they do regulate each other to prevent power imbalance by modifying each other’s powers. How does a bill become a law? For a bill to become a law there is a procedure to be followed. First a member of Congress presents a bill to the House where the clerk forwards it to a suitable committee. At the committee stage, the bill is revised and put to a vote. If it passes it is forwarded to the Senate and the House who debate on it. Then it goes to the Congress who vote on it and if it succeeds it is taken to the president for approval and it becomes law. How is a law implemented? An agency which is part of the Executive division is responsible for the implementation of the law. This agency issues directives on what citizens have to do so as to abide by the law it also breaks down the procedure for the implementation of the law. The agency issues a notice for the proposed law and collects comments through a Notice of Proposed Rule Making (NPRM). Upon receiving the comments, the agency makes a final ruling. How is the constitutionally of a law affirmed? The constitutionality of a law is affirmed if it receives no opposition at the Supreme Court. If the objections are valid, it will fail. Globalization a) What is it? Among the various ideas of globalization, what best fits your world view. Explain from the perspective of the future manager. Globalization is the trend of investment funds and business entities to branch out to foreign markets thereby increasing their area of coverage. This phenomenon involves the creation of sub-levels of command which are in turn governed from a central command point at the homeland. These centers however, need to be independent with regard to the nature of operations due to the difference in cultures and environment. What fits my world view is the idea of economic independence that allows for flexibility when joining the world market. Flexibility is therefore a key element when it comes to the idea of globalization. From a managerial perspective, failure to adapt due to rigidity may result in conflict in the foreign land that one has ventured into or market share annihilation in the business sense. The company culture therefore has to be flexible enough to accommodate all cultures around the globe. The idea of politics should however, not be neglected because a third party is a necessity; to foster good relations where there are none, before venturing into a given foreign market. b) Additionally, present a concise, articulate, and supported argument of a pro and con of globalization. For developing countries joining the global market, it has proved to be a worthwhile venture in that they get to benefit from the developed countries. An example of this is China which has made strides economically and grown her infrastructure per capita income over the years. The number of low class income earners has reduced as they have graduated to the intermediate middle stage with the rise in wages. Countries that present themselves for foreign direct investment (FDI) get the free flow of funds from the developed countries and corporate expansion follows suit, Sean D. et al. p5. The disadvantage that comes with globalization is the degeneration of terms of trade. International bodies such as the World Trade Organization (WTO) have control over the trade policies that govern the global trade and these may not be similar to those of sovereign governments. For the smaller economies this translates to the loss of control of decisions concerning trade in their countries. Therefore as much as the smaller economies stand to gain, they also face the possibility of losing control of the trade. c) Provide advice to the CEO of Walmart (the world’s largest retailer) and Apple (the world’s most valued brand) on the ethic of globalization whereby the corporation must do well by being good. To the CEO of Walmart, the ethic of globalization is the moral code involved when an entity ventures into the global market. The smaller economies should be equal partners and economic exploitation be it in the form of labor or resources should be absent. The countries may lack the infrastructure to exploit their resources and this should therefore be the gateway to a mutually beneficial partnership. In the case of Apple, the popularity of a brand should not serve as a reason to economically exploit a foreign market with the idea of monopolization of the market. References ‘Lord and Benoit Report’ (PDF). 2010-08-27. ‘Social Contract Theory. Internet Encyclopedia of Philosophy (IEP). Schutz D. Influence at the Founding. Volume 2, No. 2 (Winter 2011). Sean D. et al. ‘A Modern Philosophy of Globalization’. Forthcoming in the International Journal of Business Research. ‘Employment and Skills’ web, https://toplink .w eforum.org/article/does-social-responsibility -improve-corporate-value Kumar H. ‘Section 135 & the Concept of Revolutionary Legislation’. (Nov. 16, 2014). ‘In Defense of Smokers’. Heartland Ideas. Web, http://heartland.org/ideas/smokers-rights Read More