ECON 211 ECONOMY OF GHANA GROUP 2 GROUP 2

GROUP 2

OUTLINE; Why do we plan ? Discuss in details the various arguments. Do we have to plan in Ghana at all ? GROUP 2

Why do we plan? To facilitate effective decision making; Having a plan releases the trouble of accepting distracting ideas. Efficient use of resources; Resource allocation is very important in an economy. Planning will enable an economy place the needed resources at the needed places. Existence of weak private sector; In an under-developed country, private enterprise is weak and may fail to take the necessary risks of pioneering those industries which are necessary for rapid economic development of the country. GROUP 2

Why do we plan? Problem of unemployment; The working of the pricing system has failed to solve the problem of mass unemployment. Managing Risk and Uncertainty; Planning encourages the development of ‘what-if’ scenarios, where possible risk factors are identified and dealt with. Creating Competitive Advantages; Planning allows organizations, be it households, firms or the government, to review curent strengths and weakness relative to other competitors. In this case, weaknesses are able to be dealt with through planning. GROUP 2

The Various Arguments According to Todaro and Smith ( 2003), the arguments of economic planning have been grouped into four(4). They are; Market Failure Argument. Resource Mobilization and Allocation Argument The Attitudinal or Psychological Argument The Foreign Aid Argument GROUP 2

The Various Arguments Conditions under which market failure is common Market Failure Argument It is the inability of the price mechanism to optimally or efficiently allocate scarce resources. Market failure is common under certain conditions. Conditions under which market failure is common •The existence of public goods: a public good is a good that is both non-excludable and non- rivalry in consumption. E.g. street light •Monopoly power (Increasing Returns to Scale): when a single firm sells an essential commodity for which there are no close substitutes, they under-supply to overprice the product. E.g. ECG GROUP 2

The Various Arguments • Externalities; the competitive price system fails to allocate resources efficiently when the production or consumption activity of an economic agent affects the productivity or well-being of another economic agent and no compensation is paid. E.g. in mining communities where the water and land of the community is destroyed, this is not added to the cost and often, no compensation is paid. • Risk and Uncertainty; The market left on its own to allocate resources might fail to supply the optimal quantity of a commodity if there is a high level of risk or uncertainty about the production, pricing, and the marketing of such commodity. E.g. construction of road • Information Asymmetry; poor dissemination of perfect information on output and pricing in Less Developed Countries affects the running of the price mechanism. GROUP 2

The Various Arguments Resource Mobilization and Allocation As a result of the limited resources available, there is the need to make an efficient plan to be able to allocate resources to the necessary sectors. The Attitudinal or Psychological Argument A detailed statement of national economic and social objectives can make a positive attitudinal and psychological impact on citizens by mobilizing support from all groups of people. GROUP 2

The Various Arguments The Foreign Aid Argument When countries present a detailed and feasible plan to their donors it becomes easier for them to get assistance. E.g. Ghana gets more assistance from the USA when they have a feasible plan to present. GROUP 2

Comparing Ghana to South Africa in terms of Resources Ghana’s Gold Chart South Africa’s Gold chart GROUP 2

SOUTH AFRICA AND GHANA TODAY GROUP 2

Do we have to plan in Ghana at all? From the above illustrations, Obviously, Ghana needs to plan REASONS ARE; To properly manage scarce resources associated with the increasing population To improve the standard of living of Ghanaians To Diversify the economy GROUP 2

For Ghana to be fully developed, WE NEED TO HAVE AN EFFECTIVE PLAN. THANK YOU GROUP 2