Goal of this assignment:

Voters in all regions around the world expect their government (the public sector) to somehow help economic development in their region. 

The problem is– there is NO simple, guaranteed way to assure economic developmentand expansion.   Sometimes public sector action, such as an increase in certain taxes or regulation,  leads to better services, and helps the economy. And sometimes it doesn’t.   Debate will continue about the best balance between allowing markets (which are sometimes irrational) to dictate economic policy, and using government policy and resources to reduce uncertainty, by incentivizing comparative advantages, innovation, and investment in the region, especially at times of cyclic economic recovery, or recovering from historic economic disparities. 

Industry is best at maintaining or expanding its own profitability.  But that may not always turn into benefit for the entire economy of that region:   i.e. it may not increase employment, investment, or sustainability of that region’s economy.  There is sufficient evidence that public involvement and investment in economic development, when done wisely, strengthens economy-wide outcomes over the long term, including infrastructure, work force education and well-being, environmental protection, fair competition, taxation, regulatory and legal certainty -the foundations of a strong economy.  

For this assignment, look at two of the largest methods in government action for economic development and sustainability; A)“Transfers” (government to government), and B)“Subsidies” (government support for a business or an industry).

Based on all the items in Readings # 5  and #6,  please respond to the following questions:

Respond to the following Qs in no more than two pages altogether (double spaced, 12 pt)

15 % of final grade for this course.

1)    Decribe “Transfers” (government to government).  Describe “Subsidy”. What are the main differences?

2)    Explain several rationales (pro and con) for each -at least two each,  e.g. pro and con.

3)    Describe how people have been confused or mistaken about difference between these two policies. 

Note: I Recommend you review readings in coursepack Reading #5 and especially Reading #6

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