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Economics of Macro Issues 7th Edition by Roger LeRoy Miller,Daniel Benjamin
Edition 7ISBN: 978-0134018959Economics of Macro Issues 7th Edition by Roger LeRoy Miller,Daniel Benjamin
Edition 7ISBN: 978-0134018959 Exercise 2
In light of your answer to question, how do you explain the fact that in some countries there is widespread political support for government policies that expropriate resources from some groups for the purpose of handing them out to other groups?
Question
Consider two countries, A and B, and suppose that both have identical physical endowments of, say, iron ore. In country A, however, any profits made from mining the ore are subject to confiscation by the government, while in country B, there is no such risk. How does the risk of expropriation affect the economic endowments of the two nations? In which nation are people likely to be richer?
Question
Consider two countries, A and B, and suppose that both have identical physical endowments of, say, iron ore. In country A, however, any profits made from mining the ore are subject to confiscation by the government, while in country B, there is no such risk. How does the risk of expropriation affect the economic endowments of the two nations? In which nation are people likely to be richer?
Explanation
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Physical endowments of a country are the natural resources available for utilization in a country. Economic endowments refer to the management and development of the resources of a business, community or country. All infrastructures related to the production, distribution, and sale of goods and services are included in this.
The government policies that seize resources from specific groups for passing them out to the other groups are aiming for income and wealth equality. However, the rationale behind this ignores the importance of property rights.
For example, if miner's profits are confiscated and used for the betterment of the society then the miners will choose to reduce their mining activities. Eventually, no mining will occur, no profits will be taxed leading to no generation of income. This would be the exact opposite of the objective of equity that the group wanted to achieve by redistributing resources.
The government policies that seize resources from specific groups for passing them out to the other groups are aiming for income and wealth equality. However, the rationale behind this ignores the importance of property rights.
For example, if miner's profits are confiscated and used for the betterment of the society then the miners will choose to reduce their mining activities. Eventually, no mining will occur, no profits will be taxed leading to no generation of income. This would be the exact opposite of the objective of equity that the group wanted to achieve by redistributing resources.
Economics of Macro Issues 7th Edition by Roger LeRoy Miller,Daniel Benjamin
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