Increasing Surplus Product in an Economic System Essays Example

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Date Added: March 22, 2022

Ways of Increasing Surplus Product in an Economic System

There are several approaches to increasing surplus products in an economy. The first approach is consuming less and saving more. If the government and households minimize consumption, there would be a rise in savings. Savings has been ascertained to fund global investments (Chen et al., 2017). Likewise, imports would reduce, and minimal borrowing will be required to support consumption. Therefore, an increase in savings will be used to fund the production of surplus products. Secondly, an increase in surplus products can be achieved by the depreciation of the currency. As a result, it will make imports expensive and exports cheap and boost the trade balance. Hence, fewer amounts of products are exported, which will create an additional surplus of products (Thom, 2017). Thirdly, tax capital inflows play a fundamental role in raising surplus production. A country should borrow cheap loans from abroad in an economic system since it is straightforward. It will be beneficial for increasing the level of investments. Also, the removal of tax on foreign direct investment is necessary. The fourth aspect is the provision of subsidies. Subsidies help lower the cost of production and lead to the production of surplus products. Therefore, a considerable amount of export surplus will be realized. Contributions are the best since it assists in covering a portion of the production of services and products through tax credits. Likewise, it helps pay a percentage of consumer costs to purchase a product. Consequently, it helps encourage the production and consumption of goods and services (Zhu et al., 2017). Therefore, there will be a surge in the production of services and products.

Contrast Surplus Approach and Neoclassical Theory

Classical theory is termed as the financial and physical requirements of workers. However, neoclassical theory on the other aspects is termed the classical theory adjustment. The approach offers to increase attention to workers’ expectations and requirements. Hence, it is not only recognized as the economic and physical demands but also diverse social needs like career growth and job satisfaction. Secondly, classical theory possesses an institutional structure that is hierarchically incorporated with layers of management. All institution decisions are made by a single person who is mostly the owner (Ferdous, 2017). Additionally, the workers are provided with motivation to perform their jobs through an incentive system. In comparison, neoclassical theory possesses a flat institutional structure without layers of management. Specifically, a team is involved in decision-making and execution. The classical surplus approach linked to the theory of income distribution emphasizes the role of a public institution and social classes in controlling the conflict. Nonetheless, the neoclassical approach postulates a two-approach method by which welfare linked to the state intervenes ex-post on income distributions determined by the market. Also, the classical surplus approach suggests a one-shot way since it regards the state in its capability to produce and regulate a portion of social resources as an area of social conflict (Cesaratto, 2018). It is also a fundamental factor in controlling income distribution among conflicting social classes. Based on the surplus approach, an ideal workplace relies on three concepts. The hierarchical structure comprises three layers: owners, management, and employees. Secondly, there is specialization in which the whole operation is divided into small assignments in specific areas. Thirdly, there is the provision of incentives that motivate employees to increase their efforts. Nevertheless, neoclassical theory depends on three concepts. First, it has a flat structure with a wide regulation span (Revington, 2015). Secondly, there is decentralization which enables initiatives and autonomy in lower levels. It also focuses on the informal organization to overcome resistance to transformations on the section of workers.

References

Cesaratto, S. (2018). The classical ‘surplus’ approach and the theory of the welfare state and public pensions. In G. Chiodi & L. Ditta (Eds.), Sraffa or an alternative economics (pp. 93–113). Palgrave Macmillan UK. https://doi.org/10.1057/9780230375338_5 Chen, P., Karabarbounis, L., & Neiman, B. (2017). The global rise of corporate saving. Journal of Monetary Economics, 89, 1-19. Ferdous, J. (2017). A Journey of Organization Theories: From Classical to Modern. International Journal of Business, Economics and Law, 12(2), 2289-1552. Revington, N. (2015). Gentrification, transit, and land use: Moving beyond neoclassical theory. Geography Compass, 9(3), 152-163. Thom, T. X. (2017). Exchange rate, trade balance, and the J-Curve effect in Vietnam. Asian Economic and Financial Review, 7(9), 858. Zhu, X., Wang, Z., Wang, Y., & Li, B. (2017). Incentive policy options for product remanufacturing: subsidizing donations or resales? International journal of environmental research and public health, 14(12), 1496.