Goals of Economics (Capitalist)


Ajit Kumar AJIT KUMARWISDOM IAS, New Delhi.

Goals of Economics (Capitalist)are - 1) economic freedom, 2) economic efficiency 3) economic equity, 4) economic security, 5) economic stability (full employment and the absence of inflation), and 6) economic growth.

A. Economic Freedom

Freedom as an economic goal concerns the freedom of the marketplace- the freedom of consumers to decide how they wish to allocate their spending among various goods and services, the freedom of workers to choose to change jobs, join unions, and go on strike, the freedom of individuals to establish new businesses and to decide what to produce and when to change the pattern of production, the freedom of savers to decide how much to save and where to invest their savings.

B. Economic efficiency

Efficiency can have two meanings. The term can refer to technical efficiency, which focuses on using the least output of resources to obtain some stated level of output, or maintaining the highest level of output using fixed or specified resources. Economic efficiency is the broader concept than technical efficiency. Economic efficiency goes beyond technical efficiency and takes into account the costs and benefits associated with various market preferences and decisions. By this standard, economic actions should not be undertaken if the marginal costs exceed the marginal benefits. This would results in an over allocation of resources (inefficiency).

C. Economic equity

Economic equity can be described as the application of our concepts of what is fair and what is unfair – or what “ought to be” and “ought not to be” – to economic policy.

D. Economic security

 The goal of economic security concerns the desire of people to be protected against economic risks over which they may have little or no control. Such risks include accidents on their jobs, unemployment, destitution in old age, business failure, bank failures, and precipitous price declines
for one’s product.

E. Full employment

Full employment prevails when all of an economy’s resources are utilized to capacity, but most discussion turns on employment or unemployment of labor. In practice, an unemployment rate that reflects normal frictional unemployment- unemployment that occurs as worker change jobs or enter the labor force and structural unemployment- unemployment that occurs due to changes in the structure (i.e., technological progress) of the economy have come to be viewed as full employment.

F. Price Stability

Overall price stability means the absence of inflation or deflation, not the absence of changes in relative prices in particular markets. Inflation occurs when there is an increase in the general level of prices in the economy. As the price level raises, the purchasing power of the consumer declines (the dollar depreciates in value). Deflation entails the opposite.

G. Economic Growth

Economic growth means enlarging the economy’s productive capacity to enable the production of increasing amounts of goods and services over the long term.



Sunday, 24th Apr 2016, 10:07:23 PM

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