Hume as an economist made several essential contribution to economic thought. He trotted out the idea of free trade. British mercantilists believed that countries can achieved their prosperity by limited imports and encouraged exports. But David Hume showed this notion was invalid and by using this notion a country could not enhance its wealth. His argument was prices of goods in the country change directly with change of the money supply in the country.
The great debate between a hands off, or laissez faire, and regulated capitalism has been occurring since even before the Industrial Revolution of the late 19th and early 20th Centuries. Major corruptions lean more towards the laissez faire economic policies because there are fewer restrictions. This might be beneficial for them, but for small town companies trying to pay bills and make profits. monopolies are a worrisome thought, especially when the larger companies are wishing to expand put them out of business. Regulated capitalism is a form of hands-on policy with the government including more strict codes for the industry.
Monopoly in International Context Monopoly When firms hold large market shares, consumers risk paying higher prices and getting lower quality products than compared to competitive markets. However, the existence of a very high market share does not always mean consumers are paying excessive prices since the threat of new entrants to the market can restrain a high-market-share firm's price increases. Competition law does not make merely having a monopoly illegal, but rather abusing the power that a monopoly may confer, for instance through exclusionary practices. Predatory pricing: Predatory pricing (also undercutting) is a pricing strategy where a product or service is set at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors. If competitors or potential competitors cannot sustain equal or lower prices without losing money, they go out of business or choose not to
Laws should ensure that the every investor has a fair chance to start business and compete with its rivals. This helps to prevent monopolistic competition that may impact negatively on the economy of a country. Monopolistic competition results in unfair competition, which benefits only a few investors. Unhealthy competition within the business market has a wide range of disadvantages to the economy of a country. To begin with, it prevents the entry of many investors within the market, hence reducing the government revenue.
To Marx, alienation is dangerous in a society because it denies workers “their human, creative origins” (Hampsher-Monk 1992: 499). A flaw that Marx sees in capitalism is that for the working class, work is very specialized, meaning that a worker only needs one set of skills to produce in a factory. The ruling class view specialization as a positive, since for them it translates to high efficiency and productivity which yields a higher margin of profit. Due to specialization, Marx argues that the worker does not reach their fullest potential in life, and therefore perceives capitalism to be an unfair economic system (Hancock 1971: 65). Moreover, Marx viewed “human beings as essentially social” and because humans are social, work should be “within a context of social relations” (Sayers 2011: 81).
The markets automatically select firms and sectors to make sure the efficient resource allocation. Therefore, it is also known as the “invisible hand”. Since there is a tendency of industrial policy to distort the market mechanism, Friedman (1962) suggested a minimum state intervention only where the market could not does it by itself. On the traditional, state-aids or ownership-based approach, endeavors were made to encour-age certain segments of the economy through production subsidies or different forms of state aid or some cases through the advancement of national champions through nationalization which is the support of mergers or preferred procurement policies. However, the important role of production industry was promoted because of its linkages with other industries, knowledge spillovers due to R&D investments and dynamic economies of scale (Warwick,
Among them, 2 of which stands out as the most important catalyst for the declination of India’s economy: the Navigation Acts and the Calico acts. These mercantilist policies were mostly targeted at foreign partners, as there were rather liberal free trade policies in the domestic market. The Navigation act was enacted as a form of protectionist policy; its purpose was to secure British trade for its own merchant marine. Under these laws, all goods imported into Great Britain had to be carried either in British owned ships or ships of the countries from which the good originated from. Additionally, colonial goods needed to be shipped to Britain and then re-exported after (Cameron and Neal, 2016).
Moreover, classical liberalism believes that there should be little adequate intervention to the private owners from being too powerful to the economy and monopolies occur. Secondly, new liberalism also called the social liberalism which challenges personal liberty and private property as it states that this will cause unequal distribution in wealth and cause a wide gap between the rich and the poor. It believes that government should intervene the society to avoid inequality happens. In contrast, neo- liberalism believes government intervention is a waste of time and money since the government needs to spend a lot of money and this will reduce their revenue in return and , it emphasis on equality of opportunity and free market in the economy. Utilitarianism introduced that the main purpose for government is the increase the level of utility in the society.
This paper also studies that when the market is in a perfectly competitive equilibrium, a subsidy increases the supply of the good beyond the equilibrium competitive quantity. A Subsidy lowers the price of goods in a country providing subsidy to its citizens and thus makes these goods more competitive against foreign goods, thereby reducing foreign competition. As a result, receive lower prices for their products in the global market and discourage these countries not to engage in foreign trade. This subsidy policy of the government creates trade barriers in order to protect domestic industries and it is considered as protectionism. The problem with protectionism arises when industries are selected for a reason rather than to gain a comparative advantage by providing subsidy.
However, I would like to focus on its negative aspects as I strongly believe they overwhelm the positive side. First, shadow economy is aiming for lowering or wiping their revenue out where tax should be paid. It could cause the overall rise of tax or lower quality public services which in result burdens the weaker. Second, the presence of unfair market in the economy could yield a disparity of economy where cannot be controlled by government. This situation widens the gap between the rich and the poor.