Implementation of any policy by the government has its benefits as well as its setbacks. However the government should consider revising on the effect(s) of such a policy on various aspects of the economy.
The conversion of vacant urban plots into gardens will have both advantages and disadvantages to the economy. Some individuals or even companies will benefit from such a policy while others will be disadvantaged. Examples of such individuals or companies benefiting from the program would comprise of:
- The food processing industries. Urban gardening would increase the amount required in these industries and probably at a lower cost due to increased supply. This results to increased profit margins in such companies.
- Urban farming is part of the urban natural framework and can assume a critical part in the urban ecological administration framework. Firstly, a developing city will produce more wastewater and organic wastes. For most urban communities the disposal of wastes has turned into a genuine issue. Urban horticulture can help to take care of such issues by transforming urban wastes into a gainful asset.
- In numerous urban communities, municipal activities exist to gather family waste and organic refuse from vegetable markets and agro-commercial ventures with a specific end goal to transform manure or animal food, however one can additionally find urban ranchers who use new organic waste (which might cause ecological and health issues).The jobless city residents. Urban gardening is likely to create more job opportunities which require both skilled and unskilled labor. These job vacancies provide income to the once jobless people hence helping to improve their living standards.
- Urban agriculture will also increase the market for the farm input producing industries.
The benefits associated with such a policy are quite many. However, the policy will be disadvantageous as it will harm certain individuals/companies. These comprise of;
- The owners of such plots. They become deprived from future gains that they would get once such lots are occupied or once they invest on such plots. Most of the plots related investors build such plots not only for the current period but to cater for future needs.
Effect of the program on labor market
The program will result to increased job opportunities hence increased demand of labor in the short run. This results to increased farm produce. The increased supply of the farm produce has a negative effect on the prices. The drop in produce prices reduces demand for labor in their production sharply and reduces overall demand for labor in the agricultural sector in the long run.
The unemployment rate will decrease in the short run but increase in the long run as the supply for labor declines. The employment- population ratio will lower in the short-run but return to normal in the long run.
Using the physical-flow model of the economy, describe how this policy—if successful over time—would change the economy’s ability to accomplish useful work.
In economics, the physical-flow model is used to describe the exchange of goods, services and money between households and firms. It also describes the way through which households sell out the factors of production such as labor resources, which firms use to manufacture output, to businesses. It’s a basic yet a useful process of how markets function. In the context of this policy, the investments resulting from the implementation of this policy are the farms which buy the labor resources from the households which in return get income. The households then spend the income in acquisition of goods and services from the firms.
How this policy—if successful over time—would change the economy’s ability to create exchange value
The policy, if successful, is likely to raise the output level of agricultural products hence surplus. The surplus is exported to create exchange value
The policy’s effect on aggregate demand in the short run
Aggregate demand is said to consist of household’s consumption, private sector investment, government spending, exports minus imports. It is presented in an equation as
The policy that leads to conversion of the vacant lots by the government is said to increase investment as well as government spending hence increasing aggregate demand. The aspects of the policy leading to increase of aggregate demand include; its aspect to increase investment, its aspect to increase government spending as well as exports. They are known as injections.
There also exist aspects that lead to decrease to aggregate supply. These aspects include; increase in savings, tax and imports. These are referred as withdrawals.
Aggregate demand = national income which implies that, C+I+G+X-M = C+S+T. This in turn implies that: I+G+X = S+T+M.
Injections and withdrawals exert pressure on each other hence resulting to equilibrium level of the national income.
How is the usefulness of the policy affected by whether we’re in recession or expansion
In the expansion phase, the level of aggregate demand is rising and consequently businessmen/investors may become more optimistic. This is usually a period of rising consumer demand, rising investment demand, expanding output levels and a declining rate of unemployment. The policy is likely to be very useful since the investment that it initiates will raise the output level.
During recession, the demand of both firms and households begin to fall. Firm’s profits fall and output and employment levels fall as investors become pessimistic about the future level of demand for their products and extremely reluctant to invest in new capital. Therefore, this policy will be insignificant in such a time.
Killick T. (1981) Policy economics: A text of Applied Economics in Developing countries. London:Heinemann.