Hi there, could someone help asap with this please? Thanks What Is the Proper Ro

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Hi there, could someone help asap with this please? Thanks

What Is the Proper Role for Government in Promoting Growth? One popular explanation for the persistent poverty of developing nations is a lack of natural resources. But Hong Kong and Japan, with meager supplies of natural resources growth in recent decades than some nations that have more abundant supplies of resources. Economist Paul Romer nation invests in education and does not destroy the incentives for its citizens to acquire ideas from the r has argued that it is ideas, not natural resources, that poor countries lack most "If a poor est of the worid, it can rapidly take advantage of the publicly available part of knowledge In the United States and developed countries, most economists support three government policies that encourage the pr Subsidies for education Competitive grants for basic research . Patents and copyrights warns that it is important to limit government's power over economic policy He states that most economists favor government subsidies for education and private research, but if government officiels have power over economic policy, they may use that power to divert the results of research to narrow special interests Make sure to address the following questions: a Why do economists believe that government should subsidize education and basic research? b. Paul Romer warns that government officials may use their power to divert the results of research to narrow special interests. Explain Romer's concern

Explanation / Answer

a. Education in general had a positive externality that can last for centuries and create a space for ideas that can fuel growth. Basic research that creates an environment innovation also provides a scope for promoting ideas that can prolong economic growth. Consider a case where govt. provides subsidy for food vs. education. The role of subsidy in demand creation is limited to the point till it is spent. Its social benefit does not accrue in long term. In context of education, the benefit itself goes on for year till that body of knowledge is updated. Thus education and basic research has a key role in augmenting labor and technical progress.

b. Romer’s concern is regarding how govt may use its funds and try to promote the research that serves its own personal benefit. For e.g. – a govt may fund a research initiative that looks at impact of a policy intervention in a city. It can be expected that results of such a research is more likely to be biased in favor of the govt action. Also the govt may not understand research initiatives that can lead to a participative economic growth. For e.g. defence research funding by govt may have a social benefit but it alone won’t fuel growth in medium to long run.

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