I agree with by Paul Krugman that inflation is till considerably low. Therefore, Fed should worry more about unemployment than inflation. The level of inflation is relatively low than 2% therefore, Fed should concentrate on reducing unemployment. The economy is currently recovering and the aggregate demand is also increasing so Fed should continue to apply expansionary economic policies to help the economy to fully recover. This should be the way to go despite Phillips curve argument that unemployment decreases then inflation increases because little increase in inflation may be less harmful if it creates more employment opportunities by encouraging private sector to invest more instead of saving. In addition, when the government and private sector debt is high and inflation increases the real value of the debt decreases.
The government should direct the increased expenditure to projects which can benefit future generations because they will pay this deficit through increased taxes. While increasing the deficit the government should also monitor inflation so as not to let it grow so much.
Not Enough Inflation?
Tyler Watts’s article is made to critique Paul Krugman article that inflation is still low. I disagree with his criticism because expansionary monetary policies have worked for several countries across the globe. He talks about increased prices of commodities harming the laborers because their salaries take considerably longer to increase. This is the case but more people are employed it therefore means that the new laborers income could have been offered to existing employees in terms of increased wages. Therefore, small increase in inflation redistributed income across the nation because every person will feel some pain of increased prices of commodities but almost everyone will be employed.
Tyler Watts’s article also talks of investors benefiting in short run because they fail to increase cost of labor despite increased profit. This is no big deal because the government would have supported the investors to mobilize more money so as to pay their debts and expand their businesses for the benefit of the nation. In long run, laborers may demand salary increase to cope with increased inflation however; even if the wages are increased the rate of increase will be less than the rate of inflation. Therefore, investors will still be motivated to continue expanding their businesses and produce at lower real costs so the countries commodities will be more competitive in international market. This increased competitiveness will lead to increased volume of export and reduced volume of imports thus increasing GDP.
How FDR’s Economic Bill of Rights Changed American Politics
I agree with this article that the economic bill of rights changed American politics. This is because these are fundamental human rights which any legitimate government should look for ways of allowing its people to enjoy them. This is why in every party manifesto the issue of increasing employment opportunities, ensuring quality education, adequate medical care and availing adequate houses are always addressed. In addition, in all presidential debates the economy takes centre stage because it is only a stable economy that will allow the government to fulfill these basic human rights. The political party which shows genuine ways of attaining the rights always wins. These rights should be fulfilled without discrimination hence the government is forced to provide subsidies which decrease the cost of obtaining education, medical care e.tc.
The False Choice between “Austerity” and Economic Growth
I disagree with James Ahiakrop that increased government spending increases neither aggregate demand nor lead to economic growth. This is because his article is clearly against expansionary fiscal policy which was proposed by Keynes and which helped many countries to recover from great depression in 1930’s. The argument that increased government spending financed by internal borrowing may not lead to economic growth because this is just substituting private spending for government spending is not always true. He is saying that the government increased spending crowds off private sector and this is not be true if the private sector is just saving the money instead of spending. This is because sometimes the government may be out to start projects which the private sector may not be willing to engage in due to high risk involved despite the profitability of the projects or spend some money which household may just be saving. Therefore, the idea of expansionary policy is that the government directs it’s spending in a way to help the economy recover faster than allowing market forces to control the situation.
However, a threshold should be established to limit excessive domestic borrowing to avoid increasing interest rates which makes the cost of credit so high for private investors to afford. The government should only borrow the excess savings in the domestic market.
The Clash of Economic Ideas
In this article Lawrence White proposes an idea where a balance between an economy controlled by market forces and another controlled by the government should be established. I agree with his argument because excessive government interference in the economy takes people’s right to decide on what to do with their resources. On the other hand, if market forces of demand and supply are allowed to operate without government interference they may not be effective in achieving what many people in a country may wish to achieve. This is because personal interest may not always be the public interest. Therefore, the government should interfere only when trying to put in place policies which are in interest of the public but not in deciding everything for the private sector.
Just Wait Until It's Free
in the article Dwight Clark bases his argument on the economic law that stipulates that there is nothing like a free lunch to show how subsidies leads to increased cost to consumers indirectly. I disagree with his views because the main aim of subsidies is to make basic needs available to everyone in the society. Therefore, if the government fails to subsidize some basic needs like education some children will not be able to attend school and that class mobility in society will be limited. Though subsidizing has its weak points like denying consumer right to make choice its overall benefits to society a more because it aims at reducing the gap between the rich and poor.
The driving force of every government is to make sure basic needs are affordable regardless of cost of production. This is because a government loses its legitimacy to rule if many people cannot afford basic needs. In many cases, people may start political revolutions which will make it impossible to carry out business transactions hence bringing more disincentives to work.
Rwanda's Economic Success: How Free Markets Are Good for Poor Africans
I agree with this article that free markets are good in Africa. This is because many African government are corrupt therefore, when they interfere with market they start exhorting money from business people making it difficult and expensive to conduct business. In addition, foreign aid given to Rwanda and in extension to sub-Saharan African countries is usually used by the political elites for selfish gain instead of using it in productive investments. Therefore, it is better to have direct foreign investment to break vicious cycles of poverty in Africa than offer financial Aid. Moreover, addition of value to Rwanda’s export and diversification of economic activities is Key to enhancing stability in county’s economic growth. This is because relying on primary products makes the economy volatile because the prices of these products fluctuate so much in international markets.
Wrapping an Enigma in a Mystery: Why Inflation Is So Misunderstood
I differ with the author that inflation is hidden in lies of Keynes economic views. This is because Keynes logically explains all the causes of inflation. For example, the author talks of inflation as only caused by a situation where amount of money in circulation is more than available goods in the market this is not true because general price increase can be caused by increased cost of production.
In cost push inflation Keynes talks about increased prices of commodities due to increased cost of production. The author negates Keynes argument by saying that if price of commodities increase people can opt to buy less of a commodity something which cannot always be true because some commodities are basic and there is no way the amount consumed can be decreased. In addition, if cost of producing many commodities increases people cannot stop purchasing because human wants must be satisfied and people always wish to maintain their consumption level (Bordo, Choudhri, & Schwartz, 1999.)..
References
Bordo, m., Choudhri, e., & Schwartz, A. (1999.). Was Expansionary Monetary Policy Feasible During the Great Contraction? An Examination of the Gold Standard Constraint. The National Bureau of Economic Research. Retrieved November 26, 2012, from http://www.nber.org/papers/w7125
