Download invisible helping grabbing hand activity clothing b and QTF

All decisions result in both
private and social impacts,
nothing occurs in isolation
EU (11)
Why is it important to
recognize the seen and the
unseen outcomes of a
decision?
EQ 11, unit 3
The Government should let the
Invisible Hand allocate resources
At times the government should be
the Helping Hand
The government has evolved into the
Grabbing Hand, only making decisions
to help themselves and their “Cronies”
Free Enterprise
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-
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Markets work reasonably well
without any government
intervention.
People must be able to pursue
own-interest which in turn will
promote the general interests.
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Individuals working in the public
sector are driven by their self
interest.
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Government will exploit special
interest to keep power or special
interest will exploit government
officials to get their way.
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Rent seeking which results in zero
sum
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Capture Theory
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Iron Triangles
Subsidizing goods, services, and
activities that are perceived to be
“under-supplied”
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Government will use power
impact outcomes
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Assumes that government officials
know what is good for society
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Direct public resources to help
their political allies and hurt their
political foes.
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In an effort to achieving “optimal
social” outcomes will help the
growth of some businesses while
hindering the growth of others.
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Poor information leads to poor
decisions
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Works to achieve “social good”
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Increase of government
intervention to solve for market
failures caused by narrow selfinterest
The Government limits
involvement
Often increase taxes on those
goods, services, and activities that
are perceived to be “oversupplied”
Provides public goods
-
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Contract Enforcement
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Law and order
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Some regulation
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Leaves decisions involving
resource allocation up to private
sector
Business and Government
Directions: Assume you own a business that makes children’s clothes for both the American market and for export. For high end stores, is the
MC of extra regulations exceeded by the MB of removing dynamic competition from the market?
Half of the class owns a High End clothing manufacturer and the other half owns a children’s clothing manufacturer that specializes in
“affordable clothing”.
State whether you would want your elected representatives to support the following proposals and provide logical explanations.
Consider: Nothing happens in isolation, think past phase one.
1. Stricter pollution control on electric generating stations.
_________________________________________________________________________________________________________
2. Higher standards on the quality of clothing.
_________________________________________________________________________________________________________
3. A tax on imported clothing that will raise its price by 15 percent.
_________________________________________________________________________________________________________
4. Government gives money (subsidy) for day care for single parents.
_________________________________________________________________________________________________________
5. An import tax on inexpensive foreign fabrics, raising the price by 20 percent.
_________________________________________________________________________________________________________
6. Deregulation of the trucking industry designed to increase competition among firms that transport manufactured goods.
_________________________________________________________________________________________________________
Business and Government
7. An increase of the corporate tax rate to help reduce the federal budget deficit.
_________________________________________________________________________________________________________
8. Approval of a trans-pacific trade deal that will allow for foreign clothing to enter the markets tariff-free.
_________________________________________________________________________________________________________
9. A tax on imported cars that will raise car prices by 15%.
_________________________________________________________________________________________________________
10. Increase in minimum wage from $7.25 an hour to $15.00 an hour.
_________________________________________________________________________________________________________
11. A law requiring that labels be applied to all articles of clothing that are to be sold.
_________________________________________________________________________________________________________
12. A new law mandating that all new clothing producers are licensed to make clothing.
_________________________________________________________________________________________________________
13. A law that requires testing and certifications on all buttons and zippers.
_________________________________________________________________________________________________________
14. A government bailout to failing clothing companies.
_________________________________________________________________________________________________________
Why is it important to
recognize the seen and the
unseen outcomes of a
decision?
(write on a small piece of paper)
EQ 11, unit 3
Crony capitalism is a term describing an economy in which
success in business depends on close relationships between
business people and government officials. It may be exhibited by
favoritism in the distribution of legal permits, government
grants, special tax breaks, or other forms of state
interventionism.
Often used to prevent dynamic competition from others
“outside” the system.
Topic
Which one?
How?
What if?
Should?
Why?