Real, SN
BSA-1207
ECO 310
Activity No. 3
1. Why is the government sometimes a part of the problem of coordination
failure rather than the solution? Does this make the problem hopeless? What
could be done in this case?
Coordination failure occurs when a firm or group of firms don’t have the ability to
coordinate behavior or choices with their decision making which then leaves all agents
with a less desirable equilibrium. Since the government is the governing body that creates
and implements policies, we cannot deny the fact that they have a great impact on the
economy. The government is sometimes a part of the problem of coordination failure
because there are times wherein the policies made and implemented aren’t in accordance
with the expectations or desired expectations of the development officials or the economic
side of the country. Another reason, according to the module is that there are politicians
or government officials who are corrupt and choose to act on their personal interest rather
than the economic welfare of the society. Additionally, just like what I have observed in
our country, the government sets low prices for domestic goods and opts to import good
from other countries instead of patronizing what is ours and at the same time boosting it
(for example promoting ways on how to export our own products) Another reason is that
there is a price discrimination when it comes to wages wherein in modern sectors have a
great difference compared to those in agricultural sector. Moreover, I think the policies
made which gives the government the power to greatly interfere or make deep
interventions with business operations and give pressure to the firms is also one of the
reasons why the government is a part of the problem of coordination failure.
For me, the problem may or may not be really hopeless. Since I believe (although
it’s kind of only ideal in this time) that the people or the society is stronger than the
politicians or the government itself, the nation can oust these so-called corrupt “leaders”
and voice out their opinions or complaints. It is not hopeless in the sense that there are
still government officials who values economic welfare instead of their own personal
interests.
I think one of the great things to do in this case is also something that is already
being practiced which is the setting of the limit of candidacy and the limit in the years for
an official to serve in one term. The policies made that many aren’t in favor should be
revised or removed as well. Having an economic advisor is also necessary for the
government to be well informed regarding economic matters.
2. Why might high levels of inequality lead to lower rates of growth and
development? Why might it be difficult to get out of this kind of trap?
When there is a high level of inequality, the rich get richer while the poor get poorer.
This then leads to a big gap between the two and it also leads to lower rates of growth
and development. It is because a country is only considered to be having development
and growth when its whole nation is prospering not just financially, but also in terms of
several areas like education and health. When the poor get poorer, sooner or later they
wouldn’t be able to access education nor tend to their health problems let alone buy their
basic necessities.
It would be difficult to get out of this trap but then since it is called a “trap” just like
what is mentioned in question number three it kind of implies that there seems to be a
way to overcome the situation. It would be difficult because traps such as the middleincome trap, underdevelopment trap, population trap, and poverty trap can’t just be solved
in one-go. It takes a lot of time and process to overcome and pass through it. Although
the three previous traps aren’t as difficult as the poverty trap, it would still be difficult to
address those issues.
3. The word trap suggests that there may be a way to escape. Do you think
developing countries can escape all of the traps described in this chapter?
Which ones would be most difficult to escape? How could the developed
world be of assistance in these cases? Could developed countries do more?
Even if a trap suggests that there could be an escape, I don’t think that developing
countries could possibly escape all the traps mentioned in the book. However, it isn’t bad
to root for the possibility that it might be. I think the most difficult is the poverty trap since
the middle-income trap could be addressed much easier than the poverty trap by creating
policies and the like. Underdevelopment trap, on the other hand, can be addressed by
creating policies as well and by getting more support especially from the government.
Poverty trap is the most difficult because it is like a cycle and hard to be avoided,
especially because it also leads to a population trap, it would be very difficult for the
government and other governing bodies to help improve the situation of their country.
Although I would say that the developed world hasn’t 100% eliminated all traps in
their own countries, they could be of assistance to the said cases by offering capital
markets and investing in the human capital of the developing country. Since in poverty
trap there is little to no opportunity for some families, communities, or nations, developed
countries could extend a hand by lending money to the government or by providing
opportunities for the people. The example for opportunities could be offering jobs.
Granting scholarship would also be a great help since education opens vast opportunities.
Lastly, I think the developed countries can be of assistance to the developing countries
by giving them helpful information regarding growth and development particularly on how
to address the traps faced by the developing countries.
(*Since the last question is a bit vague for me, I’ll be answering it in terms of
developed countries coping or addressing the traps and also in terms of helping
developing countries*) Developed countries can do more in terms of addressing the traps
in their own country since it is possible that a small portion of their population only
experiences poverty trap compared to underdeveloped and developing countries.
Additionally, with regards to the other two traps: middle-income and underdevelopment, I
also think they can address it easier compared to the other types of countries since they
have more resources and capabilities to deal with it. In terms of helping developing
countries, developed countries can do more. I think if they just value equality more and
would like each and every country to be successful, I really do think that they can be of
help to the developing and underdeveloped countries more.