Fundamentals of Economics. Доловова Н.Н - 50 стр.

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Second, certain of these goals are complementary in that to the extent one goal
is achieved, some other goal or goals will also tend to be realized. For example, the
achieving of full employment (goal 2) obvious ly means the elimination of
unemployment, a basic cause of low incomes (goal 6) and economic insecurity (goal
7). Furthermore, considering goals 1 and 6, it is generally agreed that the
sociopolitical tensions which may accompany a highly unequal distribution of
income are tempered to the extent that most incomes rise absolutely as a result of
economic growth.
Third, some goals may be conflicting or mutually exclusive. Some economists
argue that those forces which further the attainment of economic growth and full
employment may be the very same forces which cause inflation. In fact, the apparent
conflict between goals 2 and 4 has been at the forefront of economic research and
debate in recent years. Goals 1 and 6 may also be in conflict. Some economists point
out that efforts to achieve greater equality in the distribution of income may weaken
incentives to work, invest, innovate, and take business risks, that is, to do the things
that promote rapid economic growth. They argue that government tends to equalize
the distribution of income by taxing high-income people quite heavily and
transferring those tax revenues to low-income people. The incentives of a high-
income individual will be diminished because taxation reduces one's income rewards.
Similarly, a low-income person will be less motivated to work and engage in other
productive activities when government stands ready to subsidize that individual.
International example: Through central planning the Soviet Union has been
able to virtually eliminate unemployment with the result that this source of worker
insecurity has almost disappeared completely. However, with little fear of losing
one's job, Soviet workers are quite cavalier regarding work effort and therefore
productivity and efficiency in the Soviet Union are quite low. Here we have a conflict
between goal 7, economic security, and goal 1, the growth of worker productivity.
This leads us to a fourth point: When basic goals do conflict, society is forced
to develop a system of priorities for the objectives it seeks. To illustrate: If full
employment and price stability are to some extent mutually exclusive, that is, if full
employment is accompanied by some inflation and price stability entails some
unemployment, society must decide upon the relative importance of these two goals.
Suppose the relevant choice is between, say, a 7 percent annual increase in the price
level accompanied by full employment on the one hand, and a perfectly stable price
level with 8 percent of the labor force unemployed on the other. Which is the better
choice? Or how about a compromise goal in the form of, say, a 4 percent increase in
the price level each year with 6 percent of the labor force out of work? There is
clearly ample room for disagreement here.
Key concepts
economic growth - an increase either in real output (Gross
National Product) or in real output per
capita

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