Free Institution of Learning Essay Sample
Economics can be said to be a form of knowledge that concerns itself with consumption, wealth transfer, and production of products and services. The analysis of distribution of produced products for consumption purposes marks the foundation of economics. Since resources are scarce, they must be allocated in the most optimal manner to derive the maximum utility. The functioning of economies and the interaction of economic agents such as sellers and buyers or even firms, individuals, and households are the subject of microeconomics while the analysis of the whole economy together with the factors that affect it such as fiscal and monetary policies, inflation, unemployment, and economic growth form the basis of macroeconomics. On the other hand, economic viability is the ability of the economic system to recover from possible potentialities as well as maintain itself. Economic systems should aim at instituting policies that are cognizant to the people’s wants and needs to ensure that they remain viable and serve the intended purpose (Samuelson and Temin, 1976).
This paper will critically analyze why cooperation between people is needed to make economics viable. The allocation of scarce resources is the subject of economics. Various economic agents aim to maximize individual utility at the expense of other people. A combination of people with an intention to produce, distribute or benefit jointly is essential for market operations. People engage in economic activities for mutual benefits. This essay will delve into the importance of cooperative economy for economic agents to derive maximum benefits in economic activities. This can only be done when viable economics is at play. More importantly, all stakeholders in the economic system must be willing to cooperate if any mutual benefits are to be realized. For this to be achieved, viable economics is integral.
Consumer cooperation has been an important element in the economic structures of so many countries. Due to misunderstanding of cooperative economy, little study has been conducted. Lack of theoretical and practical understanding of this practice has led to distorted perceptions by people about economic cooperation. Cooperation is a voluntary and democratic form of association. Cooperation is not limited by creed, color, and race and those cooperation principles are applied by groups depending on its problems (Fischer and Dornbusch, 1983).
As much as cooperation is tailored to benefit all economic agents, some critics have termed it impractical idealism, communist, labor movement adjunct, and silly-sister societies. This is primarily because economic cooperation is mostly fueled by capitalist notions that culminate in the formation of economic classes. The poverty-stricken economic class recognizes that the only way it can gain a victory over the few bourgeois is through coming together after class antagonism has been created. A revolution ensues as this class seeks to try and override the interests of the affluent class. While this may be true, it is important to recognize and appreciate the centrality of cooperative markets as far as market operations are concerned. People seek the most viable course of actions in order to mutually benefit. The economic agents are rational beings and obviously turn to the optimal activity that will accord them maximum benefit.
Charles Gide, the father of cooperative theory, realized that cooperation is neither the stepchild of any economic nor social movement. It has its own individuality. It aims at creating wealth abundance and the cheapness of economic resources with the aim to give maximum satisfaction to the economic agents at play. This is important because in the state of resource allocation, it is impractical make one person better without making another worse off. According to Pareto, efficiency occurs when two individuals share resources, they do so by cooperating. They exchange economic goods in the process. However, this exchange is disadvantageous to one party which becomes worse off and thus economic inefficiency comes to play. Therefore, cooperation will cost one of the economic agents since the compromise is not the most viable alternative. This calls for viable economics where cooperation is just one of the ingredients of economic efficiency.
The cooperation has to yield the most viable course of actions. A Cost-Benefit Analysis (CBA) should enable the economic agents review the costs they are going to incur as well as the benefits accruing from that cooperation. Both private and social costs should be examined. Social cost is externalities plus private cost. Rational choice theorists posit that consumers use only those costs they personally bear when making decisions. Costs borne by others are not put in perspective while making decisions. Private costs are borne by individuals. These costs are economically meaningful while externality is that benefit or cost which results from transactions or activities that affect an uninvolved party. For instance, air pollution caused by manufacturing activities is an externality since it is bound to affect even people who were not involved in the activity or any other transaction accruing there from. A CBA is important as far as determining to the viability of an economic policy is concerned (Lipsey and Steiner, 1966).
There is a need for the consumers to cooperate in order to improve benefits accruing from economic activities. Consumers who buy services cooperate with each other to ensure that service delivery is improved. This cooperation by consumers is very vital as it makes economics viable in the sense that service providers realize that they have no option other than making an immediate improvement in the quality of services. Just like consumer choice, consumer cooperation is a behavioral variable. This behavior consequently takes two forms that are situation-specific and service-specific forms. The situation-specific form requires that consumers cooperate depending on the situation in question. They study the environment and behave as they are ordered to behave. More specifically, consumer cooperation may take the form of public conformity where people follow the instructions from either emergency personnel or the police. Service-specific form means that the customer requires improved service if standards are by any means compromised below their expectations. Therefore, cooperation occurs when service has been delivered and it is perceived to be part of consumer experience. Since consumers pay for products and services, it is only fair that they get an equally good share of their bargain (Parkin, 1990).
Both attitudes and actions of customers are often influenced by social processes arising out of the service encounter. People will expertise three levels of adaptations in response to three varieties of social manipulate processes. Compliance happens once a customer permits control from any supplier or alternative shoppers as a result of their desires to get an award or avert social control. This induced behavior is acquired not as a result of the benefactor belief in its inherent usefulness but due to the fact that it produces fascinating consequences.
Compliance might not incessantly be the most suitable response to be induced by service marketers. People will not do the induced behaviors unless they are beneath the provider's police investigation and it is very important to limit the consumer's selections and apparent reward structure so as to achieve compliant cooperation. Put differently, compliance encourages the benefactor to form a short favorable notion on the supplier and others, and cooperation supported compliance could assume the consumer's dependence.
In conclusion, economic agents will always engage in economic activities that lack economic inefficiency. This means that cooperation is the most effective way through which people will realize full economic benefits of viable economic policies. This cooperation must be done to eliminate market distortions which are detrimental to the welfare of both producers and consumers (Sloman and Sutcliffe, 2002).