Econ 102 Assignment #1
Whenever analyzing societies, the common law, and economies the North has a special kind of definition of efficiency that to an extent coincides with maximization of the available total surplus given the existence of a free market. The society would always want to live the best lives possible by making good use of the available resources but under the guidance of common law which favors every member of the society in an equitable way. This equality could include enhancement of an equal expression of societal rights. According to North, efficiency may not be ensured by those skills that evolve from opportunities exposed by technological advancements but could be linked to a combination of elements of common law, economic resources, and social practices. According to the North, efficiency is defined as an increase in returns from a given fixed volume or aspects of inputs through extension of set of constraints that will lead to economic growth. This definition could be likened to the maximization of total surplus considering a free market that is as high as it can be.
Surplus is the quantity much more than it is required. Whenever referring to inputs, there should be a combination that would ensures that, none of the inputs is left as surplus or would be less than the rest of the input combinations. While efficiency would involve the maximization of total surplus in accordance with inputs used, efficiency would be enhanced by the method of production used especially on methods that completely utilizes the inputs. Efficiency is promoted by maintaining the same system as a way of creating specialization. Rather than having to change an institution to obtain a different system, efficiency would be obtained by changing mentality of agents especially economic argents. This issue of changing agents’ minds creates a common mind and hence a similar habits of thought.
North talks of ‘Models’ and the way they update with new information to develop further on their efficiency and on related capacities. In this case, models are from two perspectives that include the methods used in accordance with existing theories and from the perspective of the various participants in industries and markets. In the latter perspective, models are institutions and through the availability of information, any updates on the market and industrial changes would lead to a restructuring leading to a better way of action in both production and marketing. New information comes in with better technology that changes skills and production methods. The combination of the two could improve on total surplus utilization hence promoting efficiency.
There is an increasing concern on the issue of poorly performing society or economies persisting instead of being replaced with efficient ones. This is associated with input of resources as part of promoting efficiency. Allocation of resources is costly and the same applies to the provision of the adequate technology to initiate societal development changes. Since the poor societies and economies lack the required resources to call in for changes, it would be difficult to advance. The advanced economies have enough resources to fund projects that bring in development changes. These societies may do this by cheaply obtaining resources from the poor societies.
India happens to be one society that is today drawing world attention due to the fast growing economy and developmental changes within the country. This aspect could be related to the adjustments made by India in the midst of the years of 1980s. In the mid-1980s, India adopted certain macroeconomic policy adjustments. This happened alongside some liberalization of the existed industrial regimes and trade regimes all of which supported importation of foreign goods and technologies by getting rid of high restrictions on these imports. The country understood that by accepting technology from foreign economies especially in hi-tech, it would certainly reach a peak in technological advancements given that the necessary efforts were employed. India was a poor but through initiation of such regimes; it gradually developed to a point of being one of the fastest growing world economies today. The key issue in this case is that the country hardly allowed the rich economies to exploit its resources in exchange of less valuable financial aids as most poor countries do.
Instead of other country venturing India to benefit from its local resources, the country has been keen on ensuring that capital inflow is ultimate. This is one of the factors that have caused the country reach a point of competing globally with other top economies such as China, the US, Japan, as well as European nations. Capital inflow is done by encouraging part of its population to work in other nations but invest in India. The country is remarkable in its emerging car production industry by emerging forth. To get to this position the country had to cause some restructuring of its existing system rather than replacing the existing system with other systems. India’s issue of industrialization hardly started in the recent past but the country is well known through the existence of cottage industries. The country had to initiate change by incorporating external ideologies and technologies with the once existed technologies. It then had to invest heavily to develop its local industries by developing the existing industries and creating new industries where necessary. These issues enhance efficiency rather than causing the country to burdens in the industrial sector. The theory applied could be linked to the changes suggested by Veblen in terms of the right path to institutional changes. India took the right path and efficiency in the same would make the country maintain a great path in developmental changes.