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The aim of this essay is not to agree with or refute the statement made by DouglassNorth The purpose of this essay is to identify the key points of the statement and discusswith relation to the institutional evolution in the Australian financial and labour MarketsWith this it will attempt to conclude whether the statement has a relevance to theevolution of the financial and labour markets The passage taken from Norths paper Institutions has a relevance to AustraliasFinancial and Labour Markets Its relevance can be shown by analysing the key points ofthe statement These being institutions are humanly devised institutions provideconstraints to the market institutions provide economic incentives and institutionalchange leads an economy towards its success or failure Norths statement regards Institutions as being humanly devised Institutions aredevised for the purpose of protecting the various groups effected by the market This isdone by imposing corrections on a market subject to failure A market failure occurswhen the market is unable to determine the use and allocation of resources in a waysociety most desires Kirkwood Cronk Swiericzuk Searle 1999 Institutionalintervention in a market occurs due to imperfections in the market and is an attempt atammending such imperfections The key institution within the financial system is theReserve Bank of Australia RBA In January 1960 legislation was passed to create theRBA hiving off the central banking functions of the Commonwealth Bank of AustraliaCBA The induction of the RBA in1960 was due to growing concern from the privatebanking sector of a commercial bank maintaining the functions of a central bank Lewis Wallace 1997 The RBA was devised to ensure that monetary and banking policy ofthe bank is directed to the greatest advantage of the people of Australia and will best contribute to the stability of the currency of Australia the maintenance of fullemployment in Australia and the economic prosperity of Australia1 Reserve Bank Act 1959 Before 1960 the role of the RBA was performed by the
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