Policy conflicts

In their attempts to achieve the policy objectives, governments often face what are called conflict of objectives.  These arise partly because unlike private individuals, governments strive to achieve a multiplicity of objectives.

For instance, a more equal income distribution certainly conflicts with efficiency in the economic system (which reduces, the total output available for everyone).

Secondly, a fiscal policy which is meant to control unemployment may cause inflation if it achieves full employment or policies to combat inflation might call for a cut in public expenditure which in the short-run may lead to a higher rate of unemployment and a less equitable distribution of income and wealth.

Also the policy of maintaining low council houses rents on equity grounds results in long waiting list; this may be undesirable on efficiency grounds as it acts as a barrier to labour mobility and this in turn may increase unemployment.

A fiscal policy meant to cure balance of payments may not just reduce demand for imports but also reduces demand for domestically produced goods.  This in turn can have a knock on effect in the form of lower output and higher unemployment.