Want to know which one should be the priority among these two. Although mostly answer would be both. Ever in mixed case one should be priority.
The primary focus in any developing country should be in the macro side indicators like inflation reduction, unemployment control and employment generation. The reason of this argument is its essence of a true democracy representation in which the prime focus lies in the development of under-privileged class. Notwithstanding, there is an immense need to incorporate the micro economics aspects into the strategies as well.
Moreover the recent emerging strand of economics suggests that climate change, energy use and behavioral economics are far more important concerns for a sustainable development and therefore implies for the adversarial synergies of ignoring these factors and prone to legacy infrastructures in all the under developed economies of the world.
Paul: I think the national government should focus on Macroeconomic policies. But regional and city governments should focus on Microeconomic policies.
Local bodies need to be empowered to deal with Micro Economic and Local Issues.
Muhammad Shakeel , Emmanuel V Murray , Paul Stock - thank you all for your opinion!
Since macroeconomics focuses on issues such as growth, I.e. growth miracles and disasters, convergence, cross country income differences, investment, unemployment amongst others, I think it should be more appropriate for developing countries
There is no general answer to this question. It all depends on the starting position. If the macro economy is seriously out of balance (eg with heavy unemployment), then not only must macro be the priority but most micro will be worse than useless. If, on the other hand, the macro economy is reasonably well balanced, then the priority becomes micro (but not forgetting to keep the macro on track!).
Two other points are worth keeping in mind. First, unless the micro policy is really small scale, it is essential to keep both in mind. Second, most micro policy has the intention of raising supply. Unless demand is increased in step, the micro will not work. Hence the need to keep both in mind. Andrew Graham
What policies should be followed depend on what are the objectives that we would recommend. In my opinion, a major problem in India is poverty and inequality. To tackle these issues we need to introduce appropriate policies to increase employment, subsidise essential items like food and fuel. Employment is both a macroeconomic issue and a microeconomic one. Since the Agricultural sector provides employment and sustenance for a large section of the total population we need to improve conditions in that sector. See my book Development Economics, published by Palgrave Macmillan, 2016
I think you answered your own questions. Both policies are important and your question is relevant to both developing and developed economies. While microeconomic policies are directed towards specific sectors of the economy or policy area, macroeconomics is pertinent for the entire economy. I can offer one example from the US. For many years the US federal government had an objective to increase home ownership in America, for this purpose it launched many programs to achieve its objective starting as far back as the end of the Great Depression. All these policies were micro economics applications since they were affecting only certain aspects of the housing market; for examples different ways of subsidizing homes for the poor, the military people and for minorities. More recently the US Congress in its effort increase homeownership liberalized the Banking and Financial sector of the Economy by passing the Gramm-Leach-Bliley Act of 1999. Since then banks were allowed to do almost anything they wished to increase profits. Thus banks were extending loans to people who often did not qualify. The reason they could afford to do that is because they could sell the mortgages (loans) to investment banks who will securitize these mortgages using as collateral the mortgages (loans) many of which were non performing (subprime).Since credit was so easy and cheap to obtain, demand for homes increased so much that price of home skyrocketed .Thus a bubble was formed. When investors realized that many of the securities were holding were worthless tried to sell them quickly and price of homes drastically declined. Then the bubble burst and the US Subprime Mortgage Crisis unfolded and millions of people lost their jobs and homes (2007-2009) If appropriate macroeconomic policies were launched early enough to counter the microeconomic policies that boosted housing demand the US Subprime Crisis would never had occurred, This is an example that both policies are important and policy makers ought to be vigilant to avoid crises. US eventually launched extraordinary expansive monetary and fiscal policies that enable it to recover from the crisis in less than two years but at huge economic and social cost. Other countries experienced housing bubbles a few years after the US when the US Subprime Mortgage Crisis spread to Europe and elsewhere in the world. For example Spain and Ireland are two such countries that they formed their own housing bubbles.Kind regards
- Badges
- Science topic
- Similar topics
- Geoscience
- Asia
- India