How It Affects Economic Growth Essay

In my opinion, supporting and promoting IT investment is one of the best ways to promote economicalal growth and stability with minimal side effects such as inflation, and easily overcome hurdles like unequal income distribution. While I dont phone you buns re eachy influence rafts personal ownership of estimators, I do believe that pass levy incentives for IT investment and development provide make up over tout ensemble GDP, humble unemployment, and ensure an economically stable future.First and foremost, investment towards in r apieceation technical schoolnology increases productivity, and makes role players to a greater extent efficient in what they do. With more(prenominal) resources such as windy word touch, 3D Model Rendering, and instantaneous transfer of data over the meshwork, laborers in every facet of the economy benefit from technology and make merry greater productivity as a result. This increase in productivity government agency more products and s ervices be produced with little time invested, and this means that Gross Domestic Product can go up. Furthermore, GDP is frequently defined as a travel of both Capital and Labor. It is widely ac subsistledged that GDP growth can be measured by K/L, or Capital divided by Labor. Clearly, whence, if to each one worker is using a higher value of capital (here in the form of fancier computers etc), then GDP is sure to go up.The concern then becomes, what about inflation? Surely, if GDP goes up, inflation go out follow, no? not quite. The accompanying graph take backs us a rough idea of why. This change magnitude efficiency bequeath substitution the Philips wrick inward, meaning that for every unemployment rate, at that place is less inflation. More IT investment will mean that we will subscribe to more service technicians, troubleshooters, softwargon programmers, etc, and we will see unemployment go down. Also, with more children learning about IT, they will also be more seeming to take a shit put-ons when they grow up.When unemployment goes down, though, we typically see that there are less available desperate workers, and thus workers will turn over more major power to bargain collectively. They will lower wage increases, which will be passed on to consumers in the form of higher footings on final goods and services. This is run intoset by increase efficiency, as it takes less worker hours to make those products and services. As the Philips curve below shows us, the decrease in unemployment WOULD ca economic consumption higher inflation, but because of change magnitude efficiency, this change in inflation is offset.It is important to note the minuscule fertilize and huge cannonball a massive effects of levy incentives on both the big and micro levels. Here is a graph to get us startedWe enjoy that in the short bunk Demand shifts out as IT becomes more and more necessary. Supply shifts out because manufacturing costs go down, and th us satisfying firms will produce more at every price. These reductions to cost shift MC and ATC down we dont know how much each of these shifts is, though. We dont know what P2 is, but we know that costs go down, so there is abnormal short term profit, and we know that each firm is going to produce more. In the long run, more firms will enter (shifting lend out further) until each player in the food market is operating at their lowest cost on the ATC curve, which is the point where long run profits are equal to 0.We know that long run market quantity is greater because there are more firms in the industry, and we know that each firm produces in the long run what it did onward all the shifts. Each firm is producing more in the short run than in the long run. Assuming that the government offers tax incentives to BOTH SUPPLIERS AND BUYERS of IT, we can expect to see the same imply shifts and supply shifts as we did in the 90s, when demand shifted out and the cost to produce came down. The tax rebates to suppliers means a reduction of cost (same as in the last example) and the tax rebates to buyers will make the price they baffle to pay lower, which will increase demand. unrivalled of the few drawbacks to the subsequent increased IT spending, of course, is the negative effect on the environment, as computers become obsolete quickly and are usually just thrown out. In my opinion, the environmental effect is definitely a huge drawback to increased IT investment. I believe that the government should give further incentives to companies who give one-time(a) or B-stock products to schools (preferably those in bad areas) or charities when they buy new ones. Donating these more or less flawed or last-year-model computers to schools would be an investment in human capital, which would increase GDP in future generations, as children become more tech savvy and productive with computers. Since the government is reducing the cost of production with tax incentives, I think they could get away by contrasting these incentives with middling stricter environmental regulations as far as waste goes. They should set requirements on the packaging (which is created solely to be thrown out) that comes with IT goods, and should give even more incentives to companies that collect and recycle re-usable components such as circuit boards, plastic cases, and semiconductors all components that are not biodegradable and are a large sectionalisation of the junk filling our nations landfills.Another set of short and long term effects you must consider is the effect of tax incentives on those already involved in the market IT workers. Again, we give way a graph to help us visualize these effects. For this discussion, because of inflation, we must assume that we are talking in terms of real dollars, and that these wage prices are set for inflation. In the 1980s (short run), as IT became more important to industry, we see the demand curve for IT work shift outw ard, causing an increase in price and quantity as more qualified people started doing IT. In the long run, more competitors enter and the number of CS majors doubles supply shifts outward, but were not sure by how much. We know that real wages go back down, but we dont know if they are above, at, or below the original prices. We just know that they are decreasing, and that the overall quantity is much higher.The last major concern would be the Digital Divide the concept that low income families do not use computers and thus are isolated from their potential benefits. This digital divide fundamentally means that poorer families have less access to the computer and tech skills to grapple in the modern job industry, such as word processing and online research. They also have less access to online educational resources, and thus have less human capital. This means they are less likely to upgrade out of poverty, and are at a disadvantage. Those fortunate enough to be able to afford co mputers & internet access will get more educated and richer, and those who are not fortunate enough get poorer. I personally am against racial discrimination in all forms, and I think targeting out minorities and saying here, you need a computer is wrong.I do, believe, however, that there should be some sort of program to give less fortunate children of all ethnicities the IT skills and access to computers that they will need to function in the modern labor market. This is where my idea of offering tax incentives to companies that donate last year model computers to charities or schools in bad neighborhoods could truly benefit these people and help them accumulate human capital. I think that offering tax incentives to people who put computers in their home will be too difficult to manage, and I also think that in many cases, people without the means to get a good job (no technical background) will not be able to afford a computer either way thus, its a vicious cycle.Additionall y, I think people who cant afford $40/mo for DSL are in this predicament because they dont have technical skills, and thus, probably dont value technology as much as they should. They probably still wont be interested in wideband. I think the presidents broadband initiative should focus more on getting faster internet and more technical training into schools, so that the next generation, who still has the need and patience to learn about computers, can do so at an early age.Overall, you can see that there is a long listen of benefits, and a short list of easily overcome problems with increased investment. In fact, even the Fed benefits. Normally, increased investment would make the Fed have to increase interest rates to prevent inflation and cool off the economy. IT is unique, however, in that it also provides greater efficiency, thus shifting the curve as discussed earlier. I would argue that it makes the Feds job easier its promotes economic growth and employment, without jeopa rdizing economic stability. All in all, I say that magnanimous tax incentives to producers and suppliers of IT goods and services is a great plan