Data Bases • Custom Term Papers • Free Term Papers • Free Research Papers • Free Essays • Free Book Reports • Plagiarism? Links • Top 100 Term Paper Sites • Top 25 Essay Sites • Top 50 Essay Sites • Search 97,000 Papers @ DirectEssays.com • Search 101,000 Papers @ ExampleEssays.com • Search 90,000 Papers @ MegaEssays.com Free Essays • Term Paper Sites • Chuck III's Free Essays • Free College Essays • TermPaperSites.com • My Term Papers • Get Free Essays • Essay World • Planet Papers	Search Lots of Essays Back to Subjects - Economics Mr Mr Resource Allocation: An Economic Problem The issue, which I have chosen to investigate, is the allocation of resources, which are primarily money, by a local authority, namely the City of Westminster Council. The reason why this allocation of resources has become an economic problem is because money is a finite resource, so therefore there is scarcity and the council have to make choices as to how to allocate the resources they have been given. This type of resource allocation is different to that faced by a private company as they have the opportunity to expand and increase their resources, whereas local authorities often do not have the ability to increase their resources overall, rather than deflecting resources from one need to another. The Westminster council has to allocate money to various departments from this general fund. This money has to be allotted to the various departments, which require funding such as Education, Environment and Leisure, Finance, Housing, Planning and Transportation and Social services. Not only does the council have to simply allocate resources to the various departments, but it also has to judge how much of the allocation, education for example it chooses to spend on using its own staff and facilities to produce a service, rather than contracting out other companies to provide the work for them. Up until a point the department can use its existing funded facilities such as administration and technology to produce a service such as transportation and planning. An example of this may be how road maintenance is carried out. For many small roads the local authority transport department may be able to re-surface roads for a very small cost, for example £1,000 per 10m. This is very efficient for the local authority as much of the capital; labour, land and enterprise are already in place. However for bridges for example the local authority lacks the equipment, i.e. capital and labour to provide the service to repair them. In this case it would no longer be efficient to acquire the necessary labour and capital to repair the bridge. This might work out at £10,000 per meter. At this point the choice appears whether to contract out the repair of the bridge to a private company who have the capital and labour to provide this service more efficiently, or to acquire the necessary resources to perform the task themselves. Even though this decision may seem like a simple matter of choice, and making projects cost effective, it can have far deeper implications for other businesses and those working in the local area. For example if they decided to put all of their contracts out to tender then they would have very little control over how the work was carried out, the inconveniences caused to local businesses and the general public. Also, much of the revenue, which may be generated by the companies who win the contracts, may go to so called “fat cat directors” this may make the local authority very unpopular, because the profits made by the company may not go directly towards the workers who carried out the work. If the local authority decided to let all of the work which needed to be carried out, out to tender then they would not be managing their finances very efficiently, because this would undoubtedly mean that they paid more to get the work done so they would have less money to spend in other areas. Whereas, if they tried to carry out all of the work themselves this would be hugely impractical and very expensive. So what the Westminster local council would be trying to do is achieve a compromise as to how much of a service they can provide directly and how much of their responsibilities should be passed on to private companies, however this does not necessarily mean that they are free of all responsibility surrounding this issue. The following Production Possibility Frontier can be drawn to illustrate how the Westminster council have chosen to allocate their resources. However, even though you know the ratio of the money spent you can still not know exactly the shape of the graph, you cannot tell, how as the amount of funding for the council’s own transport department increases, whether it rises or falls in efficiency. Because of this we have to assume that they are allocating the money, as efficiently as possibly and therefore the curve will fall steeply. The Westminster council decided to spend approximately £9.3m on their own transport departments and projects, whilst spending £14.8m on external or contracted services or products. This reflects the fact that the council has limited capital, labour, land and enterprise because of the fact that they had to spend high amounts on money to get contractors to do the tasks, which they couldn’t. It is difficult to tell whether they chose the correct point on the production possibility frontier to operate at as you have to assume that they were operating in the most efficient way. In future it may be possible for them to operate more efficiently if they used their own departments (or Business Units as the 3rd page of the booklet refers to them) to carry out more work. However, during the 2000/2001 period it was not possible to do this because of scarcity, i.e. Land, Labour, Capital and Enterprise, which meant that they had to rely on external contractors. It is possible to move the point at which they were operating on the production possibility frontier to the left, which would mean that they relied less on external contractors, but this would necessitate the need for more money initially, which is scarce. The point, which is illustrated on the graph as E is the section of the line where the gradient begins to fall meaning that it would not be very efficient operating below this point because they would rely too heavily on private contractors. The point A, which illustrates the section of the line where the council do not have the necessary resources to operate at. The effects on the local community can vary because of the decisions they have taken. If they were to expand then they would be able to provide the same services in the long term for less money. They have also chosen to use a high proportion of contracted work, an example of this may have been the local bus services which were subsidised, because of this the public may receive a better service because private enterprise often has greater resources to provide a better and more specialised service, which is what is wanted by the public. A disadvantage of this is the local authority loses control over the works, which are carried out. Bibliography: Word Count: 1122
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