Question

What do property rights, contractual protection, the rule and law, absence of corruption, democracy, and physical and social technology have to do with economics?

Answer 1

Ans) Lets us look at the importance of each one by one.

• Property rights means the legal ownership of the property and freedom of using the resources. If the producer will not have property rights, he will lose incentive to produce as he will not be allowed to take decisions in a manner he wants to and hence the efficiency in the economy will be hard to achieve. On other hand if he has legal ownership, he will feel more secure and will produce more.
• Contractual protection provides insurance against the risks. If the producer is aware that he is insured against the risk, he can act more freely and thus improving economic efficiency.
• Rule of law, absence of corruption and democracy are needed to provide freedom to the producers and smooth functioning of the economy. If there will be no rule of law, anyone can do anything and hence can destroy whatever they want to, leading to decreased economic efficiency. Further absence of corruption and democracy is needed to provide equal opportunities which are essential for the economy to achieve efficiency.
• Physical technology i.e. machines are required to increase the output by using the limited resources in most efficient way and thus reducing wastage.
• Social technology i.e. human intellect is required to make sound decisions in the economy about what can lead economy towards growth.

All these are important factors in the economics, because economics is, using limited resources in efficient manner to produce desired results.