Efficiency and Equity in Markets and Governance


The concept of economic growth can be well understood from the start of the who play, from where the market and the director are, where the government needs to ensure the quality of the play. It all comes down to how the government handles the issue of administration and sharing of resources. This is where the subject of public finance makes the most sense. An economy that does not have a proper system of public finance, where both the fiscal and monetary policy is well laid out, is doomed to fail. And this where the government's exact role comes in – to deal with the three Es of sustainable economic development, Effectiveness, Efficiency, and Equity.  

The connection between the three outcomes is considered a matter of great debate because they create the whole world of business development. It is not just in the government where they must be considered, but across every market, if ever there is hope to have good growth in the economy. We need to face the truth that policymakers are still struggling with the concept of equity. Stepping back a bit to refer to the consumption theory, we are in an environment where resources are limited, and yet human needs keep increasing by the day. As the population grows, for instance, there is a need to have more houses to accommodate them and to have more industries to give them jobs. Therefore, it becomes hard for the government to deliver effective administration and achieve equitable distribution of resources.

Understand Equity and Efficiency

We have seen many instances, for example, where those who earn higher in society are taxed higher than lower earners. This is considered a great approach to the distribution of wealth and income to every member of society. The extra revenue collected is used to care for the less fortunate in society, which can be seen as a good gesture. However, it still hard to satisfy everyone. There are those who will always complain that they have been neglected or given fewer resources compared to other people in the same economy.  

Some managers may still be of the view that equity a cost. To them, it a good way to create interference with good public administration that could make individuals feel better and keep ministers from the eye of the media. But it also takes up a huge amount of public service time, discourages the appointment of people on merit, and builds a complex arrangement at the workplace with things like part-time work and flexible hours, making management harder and less effective.

Fear is in the heart of every executive that effective public services have to be frugal and efficient. Using tax-payer's money always raises questions, which makes it even harder to achieve effectiveness. Again, the issue of scarcity of crops is here. There could be so many government projects that need to be handled, but the revenue collected may not be enough to deal with all of them. This is where the government is compelled to borrow more money and use it in boosting the economy, which also leads to high public debt.

Effectiveness, equity, and efficiency are the main aspects of economic development that seek to understand how the government uses public funds. In other words, they can be the perfect tool for proving accountability for public finance. However, note also that these terms are used widely in economics to explain different aspects of development. It all begins from the basics of running a company, all the way through markets and into the entire economy.

In this guide, we are looking at how these three Es impacts public service, touching the government's work in distributing national resources. We can also say that fairness is involved in effective administration. Everyone needs to feel like they are being treated fairly, which main incentivizes them to work even hard for the general growth of an economy.

Effective public service is the one that responds well in a timely manner to the political demands by applying necessary policies at every given time. Every step taken in these cases should involve the lowest administrative costs, well-targeted, fair, and transparent approaches that meet national interests at any given time.

The government and the market

It is important to understand this concept from the roots by going through the market and the government's roles. So, what is the market? Generally, it is a representation of any place where goods and services are sold. The market does not need to be a physical place as we have seen many virtual markets. For instance, the labor market is not physical, yet one of the biggest in the world. Hence, a market could be anything, including a global network of telecommunication, where different agents, private and the public, interact with the population to fulfill various economic needs. With the idea of competitiveness and some capitalism, then such a market can be considered fully free. The most important idea here is that a market is where firms and individuals interact in a symbiotic manner to improve the economy. Everything that happens with such economies is well measured to handle the increasing pressures of sustainable development.

There are two main types of markets, the perfectly competitive market, and the imperfectly competitive market. Perfect competition is where all aspects are the same. In other words, it is perfect information, and every firm delivers the same good at the same price. But such a market is only theoretical. Most markets today operate under imperfect conditions where some companies have better leverage than others. For instance, those companies with information may grow bigger and better than those with less or without proper information – and those who have it are unwilling to share so that they can stay ahead of the competition. Economies based on the market operation a competitive foundation under the workforce, e.g., demand and offer, have the best incentives for the medium and long-term perspective of welfare, development, and growth for any given country.

The new economy is where we can witness the real operation of effectiveness, equity, and efficiency. Here, we find mixed systems that allow the market to deal with new pressures on market activities, which include market intervention. The market economy is considered the main global economic market. It allows firms to operate under a specified entity, which makes it easy for the government to deal with emerging issues on different levels. However, there are arguments that stress the optimal and efficient level to keep competitiveness on the same level across the global economic model. That is why we are talking about the new economy today, where everything seems to have taken a different turn in dealing with economic pressures.

In a nutshell, the markets are the ideal place where economic decisions can be made. It creates a perfect environment for new players in the business world by giving them incentives on what is expected of them by the business realm. Even though sometimes the imperfect nature of markets can make it hard for other players to join, it is still a perfect area for making economic decisions for development.

And now to the government. On a global scale, the government and state governance represent the entity the creates, implements, executes, and manages public policies. It's also responsible for deploying the executive, political, and legislative power through methods, law, and institutions in specified territories. The government plays one of the most important roles in economic development. Even though there are those who argue that government intervention does not have any effect on economic development or makes it worse, there are many who agree that it plays a crucial role.

Keynesian economic presents fiscal policy as the main way through which the government can be involved in economic processes. The fiscal policy defines how the government collects revenues through taxation and how it uses the same funds to boost the economy. There are two main types of fiscal policy, contractionary and expansionary policy. Basically, these policies explain the steps to be taken by the government when dealing with different issues in the economy. The contractionary policy is applied when dealing with an economic bubble. At this point, the economy is expanding, with increased marginal demand and less supply, which can lead to high inflation in the prices. Hence, the government steps in with approaches like reduced government spending and increased taxes. This way, marginal consumption, and production are discouraged, returning the economy to normal. And when there is a recession, the government may take the opposite route.

For a start, it will increase government spending and reduce taxing. More money in the economy means more people will start consuming various goods and services, which adds to the national GDP. Reduced taxes mean production is more efficient, encouraging companies to hire more people to close the unemployment gap. This also means more firms will find convenience entering the markets and investing in different areas, also increasing employment. The government can hire a contractor to build a new firm, which can mean more people will have jobs, and the nation will be earning more.

Let us also define what state governance means. This will help us in a better understanding of equity and efficiency in effective growth. State governance is a process defined as through the process of governing, more so, through the control and administration of public policy within the political system. This process is founded on the government, which operates under the idea of political doctrine implemented to meet a specific situation. This means everything is done under a political doctrine, and the public is involved in the whole process. The existence of a linear process is facilitated through a coalition of political parties that form the majority of the system in parliament. On the other hand, there is private sector governance, which stands for the administration, management, or governance of a corporation with the aim of obtaining economic growth. Corporate economic growth is an idea that stresses the fulfillment of the interest of shareholders and stakeholders in order to gain profits over a long period.

There is a need to consider all the issues through which some players in the field of economics react and laws and government procedures than define the interaction between individuals. Good relationships between people within a market are the main force behind effective management with efficient results. In this case, the government strives to make sure some laws define how markers interact, even with the general environment. It is important to present players that play legit when defining the entire idea of economic activity. This is because we can never overlook the relation between social and economical, which essentially defines the market and the government.

The market and the government may be opposite components in achieving different group objectives, but they can be used together for sustainable economic growth. Like firms, some organizations search for achieving their corporate interests, and hence, will follow other undeclared group interests or what other organizations are doing as they try to achieve their goals. In most cases, you will find the government at the center of its operations.

Equity and efficiency – the Conclusion

Efficiency and equity are the two essential qualities of social entities. Individual interests are fulfilled by choosing between these two entities, as well as when seeking to fulfill the groups' interests, which is why we have to deal with them in markets and the government. Adam Smith presented what is called "the invisible hand," whereby one needs to act when trying to fulfill their interests in ways that bring added-value effect even to others.  

Efficiency is where maximum production is achieved with minimum input, while equity is when resources are distributed equally to every aspect of the production. There are many concepts to defining efficiency, including Pareto efficiency, x efficiency, and dynamic efficiency. It is all in the idea of making everyone happy, as seen in the way a government allocates resources. Equity was introduced in the economy by Aristotle (2004). HoweverEfficiency, it has maintained the whole evolution path as the economy. Both equity and efficiency are needed in dealing with various issues of sustainable development in the real economy.


2028 Words


May 19, 2021


5 Pages

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