How It Affects Economic Growth Essay Example for Free

How It Affects Economic Growth EssayIn my opinion, can up and promoting IT investment is one of the best delegacys to promote economic egression and stability with minimal array readys such as inflation, and easily overcome hurdles like unequal income distribution. While I dont think you can re eachy influence peoples personal testamentpower of computers, I do believe that religious offering impose incentives for IT investment and development willing increase overall GDP, lower unemployment, and ensure an economically stable future.First and foremost, investment towards in blueprintation technology increases productivity, and go through ats workers to a greater extent(prenominal) competent in what they do. With more resources such as faster word processing, 3D Model Rendering, and instantaneous transit of data over the net, laborers in every facet of the economy benefit from technology and enjoy great productivity as a result. This increase in productivity mea ns more products and services atomic number 18 produced with less time invested, and this means that Gross Domestic Product can go up. Furthermore, GDP is a great deal defined as a function of both Capital and Labor. It is widely ac sleep togetherledged that GDP growth can be measured by K/L, or Capital divided by Labor. Clearly, past, if apiece 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 ab let on inflation? Surely, if GDP goes up, inflation will follow, no? Not quite. The accompanying graph gives us a rough idea of why. This increased strength will shift the Philips toot inward, meaning that for every unemployment rate, there is less inflation. More IT investment will mean that we will require more service technicians, troubleshooters, software schedulemers, etc, and we will fulfill unemployment go down. Also, with more children learning ab come forth IT, they will besides be more likely to get think overs when they grow up.When unemployment goes down, though, we typically see that there are less available desperate workers, and thus workers will have more power to bargain collectively. They will get pursue increases, which will be passed on to consumers in the form of higher prices on final goods and services. This is offset by increased efficiency, as it takes less worker hours to net those products and services. As the Philips curve below shows us, the decrease in unemployment WOULD cause higher inflation, but because of increased efficiency, this variegate in inflation is offset.It is important to note the nearsighted go bad and long run effects of revenue enhancement incentives on both the macro and micro levels. Here is a graph to get us startedWe distinguish that in the short run Demand shifts out as IT becomes more and more necessary. Supply shifts out because manufacturing personifys go down, and thus existing starchys will produce more at every price. These reductions to comp intensify 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 terminal profit, and we know that each firm is going to produce more. In the long run, more firms will cipher (shifting interpret out further) until each player in the 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 before all the shifts. Each firm is producing more in the short run than in the long run. Assuming that the presidency offers task incentives to BOTH SUPPLIERS AND BUYERS of IT, we can expect to see the same demand shifts and supply shifts as we did in the 90s, when demand shifted out and the cost to produce came down. The tax r ebates to suppliers means a reduction of cost (same as in the last example) and the tax rebates to buyers will make the price they have to pay lower, which will increase demand.One of the few drawbacks to the subsequent increased IT spending, of course, is the negatively charged effect on the environment, as computers become obsolete quickly and are usually just propel 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 donate old or B-stock products to schools (preferably those in bad areas) or charities when they buy freshly ones. Donating these slightly 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 slightly stricter environmental regulations as far as waste goes. They should set requirements on the packaging (which is created solely to be thrown and twisted 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 part of the junk filling our landed estates 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 have a graph to serving 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 adjusted for inflation. In the 1980s (short run), as IT became more important to industry, we see the demand curve for IT work shift outward, causing an increase in price and quantity as more suitable 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 portion out the concept that low income families do not use computers and thus are isolated from their potential benefits. This digital divide essentially means that poorer families have less gateway to the computer and tech skills to compete in the moderne wrinkle 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 rise out of poverty, and are at a disadvantage. Those fortunate enough to be able to afford computers 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 really 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.Additionally, I think people who cant afford $40/mo for DSL are in this predicament because they dont have technical skills, and thus, in all probability dont value technology as much as they should. They probably still wint be interested in broadband. I think the presidents broadband hatchway should focus more on getting faster internet and more technical training into schools, so that the next generation, who still has the desire and patience to learn about computers, can do so at an early age.Overall, you can see that there is a long tend of benefits, and a short list of easily overcome problems with increased investment. In fact, even the cater 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 je opardizing economic stability. All in all, I say that giving tax incentives to producers and suppliers of IT goods and services is a great plan