The ideologies presented by Joan Robinson in her essay are tactical and pertinent in the field of economics. They provide thran ee-dimensional perspectives on the evaluation of capitalism.
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However, the broader essence of capitalism might reveal somewhat distinct outcomes if my opinions were to be incorporated in the assessment of capitalism. The purpose of this paper is to develop an argument that the original essay published by Joan would change while addressing various unconsidered issues in her arguments.
While assuming that the equilibrium is restraining in a condition where suppositions are all practical, the ideas directed at the possibilities of attaining this state cannot be defined as illogical.
In essence, the practical determination of “equilibrium” is not based on logistics but possibilities since it is set to weigh between two distinct sides. In perspective, the claim that the state of equilibrium is the operating conditions of the economy and market becomes imprecise for being non-methodological.
Furthermore, the claim does not show how an equilibrium system can be likened to the economy. Therefore, the statements dictating that it is impossible to reach equilibrium and thus should change its base meaning is wide of the mark since attaining equilibrium is not a target to achieve anything.
Distribution of wealth in an unequal way leads to the division of the rich and the poor sectors. The division leads to economic inequality, which is the difference in the distribution of investments and resources. There exist various types of economic inequalities. However, the major type is income inequality.
The article on American Inequality in Six Charts by John Cassidy gives an analysis of the income inequality (Cassidy par. 7.). It analyses the income levels of the top earning families, which form one percent of the population and the low earning families, which form ninety-nine percent of the total population. It offers a closer look at the effect of economic inequalities in both the short run and the long run scenarios.
There are arguments for and against economic inequalities. Economic inequality is not favored by all. Those against it argue that a more equal society performs better than an unequal society (Wilkinson and Pickett 57).
However, some say economic inequality is beneficial to the economy because it increases the efficiency (Jonathan and Andrew par. 1.). It is argued that wealthy individuals always save more than their counterparts. Therefore, inequality would benefit the overall economy through collection of more savings, which cause capital accumulation and growth.
Economic inequality has various roles to play in the growth of the economy. Its major role is to give incentives for families to work, save and invest the funds (Jonathan and Andrew par. 7.). The rich work harder to make more money. They make well informed investments to maximize their returns so as to make extra money.
This inequality also acts as an incentive to the poor to work harder with an aim of becoming rich. By being an incentive to work, economic inequality create high social mobility as individuals look for opportunities in the employment industry. If these opportunities exist, then the economic inequality gap decrease and the poor become rich.
Reduction of the economic inequality can be possible if there is a good market (Sato and Fukushige 65). Goods’ market is a market where consumption goods are bought and sold. A goods’ market facilitate consumption by the rich and poor, which reduces the economic inequality. The production of capital goods and opening of a capital market lead to increment of the income inequality.
This scenario holds in the short and long run case. Capital goods are intended for capital formation. Low income earning families cannot afford to purchase these capital goods. This is because their income is too low to allow for activities such as investment or saving. As such, the economic inequality keeps increasing as the rich continue to acquire the capital goods.
As observed in the John Cassidy article, the income inequality increases in the long term because the top one percent of the American population being the rich can acquire capital goods. This increases their returns and thus their accumulated income increases. The poor who make up ninety-nine per cent cannot invest and thus the inequality gap increases in the long run.
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Inflation is a major economic problem faced by all countries. Governments rely on the monetary and fiscal policies to help control inflation and its effects to the economy. These policies must be applied effectively if the desired results are to be attained. The effectiveness of these policies is, however, faced with problems and restrictions. Income inequality largely affects the proper implementation of these policies.
A contractionary monetary policy is intended to reduce the amount of money in supply in an attempt to reduce inflation. This policy incorporates the use of taxes to attain this objective. However, an increase in taxes can adversely affect the low-income earning families. The wider gap in income inequalities causes higher effect.
Therefore, the various contractionary policies have to be applied with moderation and thus the set objective may not be attained effectively. In an article posted by John Cassidy, most individuals would not support the government to reduce the income differences. This has led to a sharp increase in the income inequality. This large gap affects the effectiveness of the policies used to reduce inflation.
Policies intended to stimulate aggregate demand and spending target the reduction in prices and an increase in the supply of money in circulation.
These steps increase the demand for goods and an increase in overall spending. The increase in the amount of money in circulation leads to an overwhelming demand for goods that surpass the capability of firms to produce and meet the demands. As a result, firms increase their prices to regulate the demand leading to inflation in the long run.
In my opinion, economic inequality is more a problem than a benefit to society and the growth of the economy. Economic inequality does not support development since there is no growth in the general welfare of the population. It leads to unequal growth of the economy and thus does not benefit the entire economy.
Increase in economic inequality leads to discrimination between the rich and the poor. Inequality affects policy implementation negatively. Policies cannot be as effective due to the large gap between the rich and the poor caused by income inequality. The negative effects of the economic inequality outweigh the positive effects and thus I consider it retrogressive.
Cassidy, John. n.d. The New Yolker: Rational Irrationality. n.d. Web. 12 Dec. 2013. <http://www.newyorker.com/online/blogs/johncassidy/2013/11/inequality-and-growth-what-do-we-know.html>.
Jonathan Ostry, and Berg Andrew. n.d. Finance & Development, September 2011 – Equality and Efficiency. n.d. Web. 9 Sept. 2014. <http://www.imf.org/external/pubs/ft/fandd/2011/09/berg.htm>.
Sato, Sumie, and Mototsugu Fukushige. “Globalization and Economic Inequality in the Short and Long Run: The Case of South Korea 1975-1995.” Journal of Asian Economics 20.1 (2009): 62-68. Print.
Wilkinson, Richard, and Kate Pickett. The spirit level: why more equal societies almost always do better. London: Allen Lane, 2009. Print.