Presentation on theme: "ECONOMICS: GOVERNMENT AND THE ECONOMY Mr. Irwin---Heritage High School."— Presentation transcript:
ECONOMICS: GOVERNMENT AND THE ECONOMY Mr. Irwin---Heritage High School
Important Vocabulary Regulation Eminent Domain Regulatory Agency Merger Deregulation Common Resource Government Failure Poverty Rate
Government Involvement Government plays a role in economy Should it? Is it allowed to intervene? Yes—Article I of the Constitution Allows Congress to perform a variety of tasks Lay and collect taxes Borrow money Regulate interstate and foreign commerce Coin money and regulate its value
Regulation Government establishes laws and rules designed to influence economic behavior in desirable ways Known as “regulation” What do you think? Is this right? Turn to a partner and share
Protecting Property Rights Comes from Constitution Essential for free enterprise system Why? Incentives matter Ownership: Encourages people to care about property Encourages productive use of property Encourage development of property in ways that benefit others Exception: Eminent Domain Power to force transfer of property to gov.
What Regulatory Roles? Maintaining Competition Justice Department Federal Trade Commission Regulatory Agency---makes and enforces standards for an industry or area of economic activity Common crimes Price fixing Bid rigging Market division Monitors mergers---illegal if it lessens competition
What Regulatory Roles? Protecting Consumers, Savers, and Investors “Caveat Emptor” The Jungle Unsafe at Any Speed Investors Federal Deposit Insurance Corporation (FDIC) insures all bank deposits for up to 100k per depositor
What Regulatory Roles? Protecting Workers Department of Labor (DOL) OSHA---Occupational Safety and Health Administration Sets safety and health regulations for industries Examples: Construction workers wearing helmets, highway workers wearing reflective vests Established in 1971, workplace fatalities have decreased by more than 60%
Perils of Government Regulation Problems can occur Overregulation Regulation itself can be expensive Can actually hinder economic activity Construction worker may abandon job in order to avoid certain regulations Balancing costs and benefits Everyone likes clean water, but how clean does it NEED to be? Regulatory capture—too close with the industry
Addressing Externalities and Public Goods Supporting Positive Externalities Subsidies---college grants and low interest loans Vouchers Public provision—government chooses to finance the production of a good or service itself Postal service, air traffic control systems Limiting Negative Externalities Command and control policies---rules and enforcement Market based policies---rely on incentives
Tragedy of the Commons Negative externalities happen when property rights are not well defined Example: Air----common resource Can be overused and destroyed Called the Tragedy of the Commons
Preserving Common Resources Government may decide to preserve common resources Tolls Can be a corrective tax Quotas Turn public resource into a private one--- Privatization Example: Overfishing
Promoting Economic Well-Being Promotes economic stability---widely accepted currency Stimulate economic activity through tax incentives Economic stimulus packages Income redistribution through antipoverty programs Progressive taxation Welfare programs Food stamps, public housing, school lunches Earned Income Tax Credit Any unintended consequences?