What do you want to achieve in life? What are your goals for the coming semester? We all set some goals in our lives, prepare plans and work to achieve them. Similarly, economic systems have some goals, too. These goals are defined so that an efficient system should achieve them. In this article, we will learn all about economic and social goals and their importance. If you are ready, let’s dive in!
Economic and Social Goals Definition
Economic and social goals are an important part of an efficient economic system. These goals guide policymakers to make proper economic decisions.
Economic systems are designed to achieve certain goals. In the United States, there are seven major economic and social goals that are accepted and shared by the United States. These seven goals are economic freedom, economic equity, economic security, economic growth, economic efficiency, price stability, and full employment.
Economic and Social Goals in a Market Economy
Economic and social goals are the targets to achieve in a market economy. Economists use them to measure how efficiently the system works.
Each goal has an opportunity cost since we need to use some resources to achieve them which we could use for any other goal. Therefore, in a market economy, sometimes we need to prioritize the goals which might lead to many controversies between several market players. Sometimes, these conflicts would happen not among different goals but within a goal.
Think about the minimum wage policy. Increasing the minimum wage would benefit workers who work for minimum wage. It would also be an advantage for the economy since more earnings will be spent, which will help economic growth. However, on the production side, the high minimum wage would hurt firms since wages are a significant cost of production, so higher wages might lead to increased prices. If the change in prices is high, that would hurt the economy since it would decrease consumption. Therefore, economists and policymakers should study the equilibrium point carefully and take each aspect into account before making a radical change.
A meeting of Trade Forum, Wikipedia Commons
Common Economic and Social Goals
There are 7 major economic and social goals that are very common across the United States. We will learn them one by one.
Economic Freedom
This is one of the cornerstones of the United States since Americans find freedom of any kind traditionally very crucial. They want to have the freedom to choose their jobs, their firms, and the way they use their earnings. Economic freedom is not only for the employees but also for the employers or firms as they have the right to choose their production and sale strategies as long as it is in line with the state laws.
Economic freedom means the market players such as firms and consumers have the right to make their own decisions.
Economic Efficiency
Economic efficiency is another main goal of the U.S. economy. In economics, we say that the resources are scarce and the use of resources in production should be efficient. If the use of resources is not efficient, then it means there is waste and we could produce fewer products or lower quality products compared to what we can achieve with the resources we have. Thus, economists suggest that all decision-making processes in the economy should be rational and efficient to achieve the economic efficiency goal of the economy.
Economic Equity
Economic equity is another economic and social goal in a market economy. Many people would agree that equal work should get equal pay. Legally, discrimination against gender, race, religion, or disability in employment is not permitted. The gender and race gap is still an issue today and economists continue to analyze the reasons and work on strategies to overcome discrimination in employment.
Gender Equality logo by the UN, Wikipedia Commons
Economic Security
Security is a basic human need. Therefore Economic security is also a crucial economic and social goal. People would like to have security if something happens and the ability to make new decisions. Protection against layoffs and illnesses is the main economic security policy of the economy. If something happens at work and some workers get injured, the employer should cover the costs for their workers, and this right is protected by the law.
Full Employment
Another economic and social goal in a market economy is full employment. According to the full employment goal, individuals that are able and willing to work should be able to find jobs.
Having a job is crucial for individuals since for most people it is the only way to earn money and provide a living for themselves and their relatives. To be able to consume, pay the rent and buy groceries, we all need to earn money. However, sometimes, especially during uncertain economic crises, unemployment issues rise. If the unemployment rate keeps rising, it will lead to a significant economic issue. Therefore, people want the economic system to provide enough jobs and full employment for the nation.
Price Stability
Price stability is another major economic goal. To have an efficient economic system policymakers try to have stable economic figures and protect the level of prices. Inflation plays an important role here. If prices rise too much, individuals would require more money for their daily needs and people with fixed incomes start to experience financial hardship.
Inflation is the rate of increase in prices over a certain period of time.
Inflation is not only negative for individuals but for firms and governments as well. Under unstable conditions and with no price stability, firms and governments will have a hard time planning their budgets and investments and might be discouraged to start new business activities or major projects that would create new jobs or better public goods. Therefore, stable conditions in the economy are desired for economic growth for all market players.
Economic Growth
The last goal is economic growth. We all want to have a better job, better houses or cars. The list of things we want never ends despite what we already have. Economic growth plays a key role here to enable economies to develop and produce more jobs, higher quality products, and higher living standards.
We should also take into account that population has a rising trend for most of the world. To have economic growth, the growth in economic measures should be larger than population growth to improve living standards.
Importance of Economic Goals
The economic goals we covered above are of vital importance for the economy and society. They are like guides for us when we have to make a decision. Think about the reason why you are studying now. You want to have a good grade or learn a new concept maybe. Whichever it is, you have some goals that you want to achieve and you plan your work according to your goals. Similarly, policymakers plan their economic programs according to these main goals.
Another important role of these goals is that they help us to measure the improvement we have as a society or in the markets. In economics, everything is about efficiency. But how do we measure it? These goals help economists to create some economic metrics and check them along the way. Observing improvement would help us to learn from our experiences and modify our strategies to achieve higher levels.
These seven goals we talked about above are the common and widely accepted ones. However, as the economy and society evolve, we might have new goals. For instance, with the increasing temperature, a new goal for most countries is fighting climate change. Can you think of any other goal we might set in the near future?
Examples of Socio-Economic Goals
An example of the economic security goal is the Social Security program, which was set up by the American Congress. The Social Security program covers the disability and retirement benefits of workers at the national level. Another example is the Medicare program, which was set up by the U.S. government to provide healthcare insurance to all persons over 65.
The minimum wage is an example of an economic equality goal since its aim is to ensure a certain welfare level at each income level. It is an economic policy at the national level that determines the minimum wage any employer can pay to its employees. In other words, it is the lowest legal wage. This wage is calculated considering the inflation rates and the cost of living and changes (usually increases) as time passes, but not very often.
An example of the importance of the price stability goal is the high inflation rates we have seen after the COVID pandemic. Because production was slow during the pandemic, the prices increased all around the world when demand rebounded faster than supply. People with fixed incomes are having a hard time compensating for increasing prices. Even though wages increase as well, to be able to increase welfare, wages should be increased more than inflation, which is not the case in most countries. As a result, the overall welfare level of individuals is staying the same or becoming worse with inflation.
Economic and Social Goals - Key takeaways
- Economic and social goals are an important part of an efficient economic system. These goals guide policymakers to make proper economic decisions. They are also important to measure improvement in the market.
- In the United States, there are seven major economic and social goals that are accepted and shared by the American nation. These seven goals are economic freedom, economic equity, economic security, economic growth, economic efficiency, price stability, and full employment.
- Each goal has an opportunity cost since we need to use some resources to achieve them which we could use for any other goal. Therefore, in a market economy, sometimes we need to prioritize the goals which might lead to many controversies between several market players.
- In addition to the common goals, we might have new goals. For instance, with the increasing temperature fighting against climate change has become another goal.
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