Tradeoff Society Faces Is Between Essay

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Productivity can also be influenced by tax cuts. Cutting taxes can enable consumers to buy more goods and services, and enable companies to produce more and to invest more in their enterprises. Productivity can also be limited or enhanced by regulation. In the short-term, less regulation tends to increase productivity but makes prices and wages less stable. In the long run, not enough regulation can have a counter-productive effect, as occurred with the lack of regulation over the banking industry and the subsequent credit crisis of 2008. Deregulation and a failure of oversight can also incentivize corruption

Productivity can be formally regulated through price ceilings and floors. Price ceilings tend to discourage production, given that prices that are artificially too low can make it impossible for sellers to meet demand. Price floors can encourage too production, given that producers are guaranteed a specific minimum price for their output, but can also reduce sales and result in a market glut. Tariffs can encourage or discourage production as well. High taxes or outright prohibitions upon imported goods can channel consumer dollars to imports, and also limit competition from outside goods.

But not all policies that influence productivity are economically related. World War II, for example, had a tremendously simulative effect upon the economy, given how many resources were necessary to be used fighting the war. The defense build-up of the early 1980s also had a more mild simulative effect.

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The economic difficulties of the 1970s were partially generated by the increased powers of OPEC and its negative relationship with the West, which resulted in tight controls over the supply of oil, higher prices, and thus less productive dollars being spent upon generating goods and services. This artificially enforced scarcity, which had a political a well as an economic origin, drove prices upward.

Investment in research and technology, which can be funded by the government, can increase productivity in the long run. More efficient technology can enable producers to generate the same types of goods and services, at a cheaper cost to consumers, because of greater use of available resources. Increased communication and venues to buy and sell, such as over the Internet, can increase the incentives for producers to be more productive.

The productive output of a nation is usually measured in terms of GDP (Gross National Product). GDP is defined as the total output expenditures on goods and services by firms, consumers, and imports and income from the production of goods and services. GDP is often critiqued as short-sighted in the way that it "counts as economic benefits the costs of prisons, pollution, and so on, not distinguishing between desirable and undesirable consequences of economic activity" and deemphasizes the long-term benefits of polices such as research and technology, and investment in education (GDP, Economic productivity, 2009).

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