Micro Reform? (1 Viewer)

[mattchan]

For the individual
- Short structural unemployment as certain inefficient industries shrink in their size of operation due to exposed competition

For the government
- Less revenue raised from tariffs and taxes etc.

For the business
- Some businesses and firms may close down because they are not competitive in the global economy.

 

[sk8ie_boi]

Some help on dis question?

Explain TWO problems associated with microeconomic reform in Australia.

I can think of benefits, but problems .. well. It takes a long time to be in effect? .. I can't fink of anything else.

 

[Demandred]

Problem 1. Creation of negative externalities.

The neo-classical idiots believe that all economies are highly elastic and transitions are made with very little costs. But as well all know, there are structural unemployment and social decay. What may result is higher crime and poverty with higher levels of government expenditure on welfare payments. These ugly features wills significantly affect business confidence.

Problem 2. Lower levels of consumer satisifaction.

The privatisation of government enterprises given big businesses great power in determining the price of their goods and services. Enterprises doesn't have the incentive to stick with low prices due to as they aren't accountable to the people.

 

[tWiStEdD]

Ahhh...
Demandred, it's a pretty dark take on microeconomic reforms. You can't allow these young eco students to think it to be as bad as you say.
Also, I don't think that the 'social decay' arguement really stands at all.
All that happens is that businesses which have stagnated and remain relatively inefficient will collapse. Sunset industries will be allowed to fade while sunrise industries will grow and prosper (for now).

The big problems I would attribute to micro reforms are:
a) A short term increase in unemployment. I would suggest that this employment is frictional rather than structural. However, this would depend on the specific type of reform we're talking about. Generally speaking there will be increased unemployment in the short term but a decrease in the long run.

b) Demandred is mistaken when he says that consumer satisfaction falls. I suggest that there would be a decrease in national savings caused by the fall of disposable incomes, income tax and tariffs. The effect of this fall in national saving is a rise in interest rates.

c) i would be repeating mattchan.

he's on the ball, that fella.

 

[Demandred]

Well, a reduction consumer surplus in the short term, which is basically consumer satisfaction .

Hey twisted, I really do think the stability and satisfaction of the economy as a whole is a significant factor when considering where to invest, especially in a highly globalised economy.

 

[sk8ie_boi]

Ahh okay .. thanks guys .. so yeah .. no other problems dat you can fink of? .. cuz normally micro reform should be good.. and .. yeah .. problems are kinda hard to figure out .

 

[d_a_n_z]

How does struutural unemployment occur with IR? The issues you guys are discusisng just seem to be about reduction of tariffs? --> which is only ONE reform...dont v you need to be more general?

 

[tWiStEdD]

what do you mean by IR? industrial relations reforms? i really hope you don't mean industrial relations reforms...

you need to consider the entire spectrum of microeconomic reforms. this includes, but is not limited to, erasure or limitation of tariffs; changes to industrial relations systems (i.e. regulation or deregulation of the labour market); deregulation of other industrials (TFC for example); and... i cant think of anything else.

they all have different effects. some cause structual unemployment, others give you more employment. can you tell me which do what?

 

[mattchan]

How does struutural unemployment occur with IR? The issues you guys are discusisng just seem to be about reduction of tariffs? --> which is only ONE reform...dont v you need to be more general?

Yeah, i kinda get what you mean. Like labour market deregulation may cause inequality in income and wealth, restricted macroeconomic policy for the government, etc.