Nationalism

Question 1

Define nationalism

Answer 1

Process of taking an industry into public ownership

Question 2

Benefits of nationalism

Answer 2

1. Greater E.O.S –> producitv efficiency gains- lower AC so lower P’s for consumers
2. More focus on service provision–> maximise social welfare, allocative efficiency, lower P’s so CS maximised
3. Less likely to be market failure arising from externalities
4. Public sector can be a great vechile for macroeconomic control

Question 3

Why is there less likely to be market failure arising from externalities as a result of nationalism

Answer 3

• Considering full social costs/ benefits when producing
• Quantity/ output resemble socially optimum level of production
• Minimising under/ over production = allocative effiency gains
• Free market only consider private costs/ benefits

Question 4

Costs of nationalism

Answer 4

1. Dieconomies of scale - problems of coordination, communication, motivation = increase AC, loss of productive efficiency gains - higher P’s for consumers
2. Lacl of incentive to minimise costs
3. Complacent and wasteful production –> lack of profit motive so x-ineffiency
4. Lack of SNP–> dynamic ineffiency: less R&D, innovation and reinvestment
5. Highly expensive and a burden on taxpayers= opp. costs- use taxpayer money in other areas
6. Higher P’s due to low competition (monopoly outcomes- less output)= allocative inefficiency
7. Greater risk of moral hazard - taxpayers bare the burden
8. Politcial priorities override commercial issues (even if benefits outweigh costs as theres a risk involved which could potentially affect later elections)

Question 5

Evaluate nationalism

Answer 5

• Funding vs delivering key public services
• PPPs better (public private partnership)- private sector pays for construction and maintianance of a project, whilst public sector praises private sector and rents and uses it
• Role of regulation
• Competition in private sector = lower P’s
• Size and objective of private sector firms