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Competency 1 - Reflection

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Instructors’ Name

Course Name

Subject

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Reflection

The course, ECOCB/535: The Digital Economy, provides a comprehensive understanding of the intersection between economics and digital technology, which is highly relevant to my current role in tech consulting. From the insights I gained through applying digital strategies, I effortlessly incorporated digital strategies within my workplace to improve efficiency and market reach. In the face of encountered challenges and through the development of a proactive attitude, I crafted solutions that not only allowed us to overcome the obstacles but also formed a resilient organization and promoted growth. Through the Pacing Guide, I manage my progress by determining the parts where I need to excel and reinforce my skills, thereby creating more room for a greater ability to surf the complexities of the digital environment.

Competency 1 - Reflection:

On this reflection, we dig deep into three key areas forming our appreciation of the digital economy. First, we look at the role of economics in influencing public policy through the aspect of taxation at the different levels. Thereafter, we consider factors of production, with a little more emphasis placed on innovation and physical capital and how their productivity has been influenced by specific laws. Finally, we will investigate economic concentration, implications thereof, and the influence on different industrial strata.

Role of Economics in Public Policy

Household Taxation: Economics gives directions on how household taxation should be done and it supports progressive systems of taxation where the level of taxation is directly proportional to the level of income (Vermeer, 2022). It does so to transfer the tax burden equitably through the strata of income. For example, I belong to the category of the middle-income earners who pay a certain amount of tax, which essentially affects my disposable income. It then affects my consumption, saving, and investment.

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Business Taxation: Economics helps in achieving equilibrium between the need for government revenue through business taxes and the desire to maintain an appropriate business environment (J. Auerbach, 2021). Lower corporate taxes favor more investments and growth within the businesses, although they reduce the revenue for the government. I have first-hand experience in observing how a decrease in corporate tax rates can encourage more investments in business.

Tariffs: Economic science also encapsulates the realm of tariffs or import taxation.

Tariffs can provide some protection to domestic industries from international competition. At

the same time, tariffs may result in rising prices of many goods, and, in turn, trade partners

may retaliate (Nevil, 2023). Tariffs may lead to retaliation from the trade partners. In my

professional life, I have seen how tariffs on certain goods lead to increased costs and make

the business rethink its sourcing strategy.

It provides the lens to understand the trade-offs in these areas and, therefore, design

policies that will strike a balance among the various competing interests. In the armory of any

policy maker, it is one of the most important tools, through which public policy is cast in a

manner having far-reaching implications for our lives and careers.

Factors of Production

Among the Act establishing factors of production, an example is the 1956 Federal Aid

Highway Act that created the Interstate Highway System within the United States and greatly

increased the productivity of both innovation and physical capital (Phelps, 2021). Highways

proved to be the basis for rapid and effective carriage of people and goods to any part of the

country. Since this is a dimension of physical capital, an enhancement of the infrastructure just

as directly upped the productivity by lowering the cost and time of transport for both goods

and people. Besides, the highway gave rise to all sorts of innovations within different

industries: automobile technology, logistics. It also gave life to new types of business, the best

example of which is fast food and motels, due to greater mobility. Thus, the 1956 Federal Aid Highway Act is an example of a law that increases productivity of innovation and physical capital, two key factors of production.

Economic concentration

Economic concentration is a market situation in which very few firms are available in the industry. Here are three examples:

1. Tech Industry: The tech industry has companies like Google, Apple, and Facebook that are dictatorial in the respective market shares.

2. Telecommunications: Large numbers of telecom companies globally dominate few big firms. They wield the might to affect both the price and quality of service.

3. Retail: The retail sector is dominated not only by online giants such as Amazon but also by offline giants like Walmart.

Economic concentration has its advantages and disadvantages. Large scale companies can enjoy economies of scale, and hence, they have low costs and prices of their products. They can also be innovative, as they can afford to spend more on research and development (Philippon, 2019). However, the risks are that there will be no competition, which could cause prices to skyrocket and give consumers fewer choices. Moreover, there is a risk that the potential is for the companies to grow too powerful, orchestrating regulations that cater to their advantages. Great economic concentration in a few players in my line of business has worked to foster innovation on one hand, although it also worked to make it a challenge to smaller firms that were trying to compete.

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References

J. Auerbach, A. (2021). The Taxation of Business Income in the Global Economy.

NBER. https://www.nber.org/reporter/2021number3/taxation-business-income-global-economy

Nevil, S. (2023, May 28). What Is a Tariff and Why Are They Important? Investopedia.

https://www.investopedia.com/terms/t/tariff.asp

Phelps, H. (2021). When Interstates Paved the Way. Www.richmondfed.org; Federal Reserve Bank of Richmond.

https://www.richmondfed.org/publications/research/econ_focus/2021/q2-3/economic_history

Philippon, T. (2019, December). The Economics and Politics of Market Concentration.

NBER. https://www.nber.org/reporter/2019number4/economics-and-politics-market-concentration

Vermeer, T. (2022, June 14). The Impact of Individual Income Tax Changes on Economic Growth. Tax Foundation.

https://taxfoundation.org/research/all/state/income-taxes-affect-economy/