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Why do we have corporate daycare? Who should raise our children? Business Government Families …one can best analyze modern society by thinking of it as an uneasy amalgam of three distinct realms: the social structure (principally the techno-economic order), the polity, and the culture. Daniel Bell Government Culture Business Government Social Contract Culture Business Social Contract: Underlying agreement between business and society [the institutions of society] on the basic duties and responsibilities business [each of the institutions] must carry out… reflected in laws and regulations [and tacit understandings] p.9. Government Culture Business 1776 1876 1930 1976 Economy Agriculture Local Markets Transportation Communications Industrial National Markets Robber Barons Depression Post-Industrial Global Markets Corporations Government State Power Laissez faire Federal Power Antitrust ICC FTC New Deal: Social ICC, NLRB, Regulation: FDIC,SEC EPA, EEOC, CPSC, OSHA… Culture Rural Agrarian WASP Slavery Immigration Urbanization Segregation Changing Workforce Mobility Feminism Civil Rights Diversity Government Culture Business [We] have embraced a half-truth as the basis of our dominant social philosophy and public policy. The half that is true is that at the root of our deteriorating state lies excessive governmental intervention in private lives. The half that is amiss is the assumption that merely slashing the government will restore America’s economic, social, political, and ethical vigor. Amitai Etzioni Merely cutting back government will not set America on a course of recovery unless these efforts are coupled with a period of reconstruction of community—of family, schools, neighborhoods, and nation– and above all individual renewal. Amitai Etzioni Figure 9-1 C9-S2 Korean War WW II WW I Civil War Volume and Intensity of Government Regulations Historical Waves of Government Regulation of Business Wave 4 Wave 3 Wave 2 Wave 1 1790 1837 18611865 19171919 1933 19421945 1950 1953 1960 1980 1990 Historical Patterns of Federal Regulation of Business First wave – Few regulations (Laissez Faire) some promotional for business. Second wave – The era of regulation was dominated by public demands for government to regulate big business, and the Supreme Court gave the federal government new power to act. Antitrust Regulation Third wave – The burst of activity in this wave was the result of many New Deal laws designed to deal with the ravages of the Great Depression of the 1930s. Fourth wave – Intent to improve the quality of life resulted in new controls that deeply involved government. Social Regulation McGraw-Hill/Irwin 10-12 © 2006 The McGraw-Hill Companies, Inc. All rights reserved. Government regulation of the private sector is justified under two circumstances: Economic: When flaws appear in the marketplace that product undesirable consequences. Social: When adequate social, political, and other reasons for government regulations exist. 10-4 Reasons For Regulation 1. Economic -- Focus is market efficiency and control Market Failure (Assumptions not met). Natural Monopoly Where because of natural conditions, a single firm can supply the entire market more efficiently than several competing firms. Weigh economic benefits versus economic costs Reasons For Regulation 2. Achieve Social/Political Goals Non economic values in the public interest Socially desirable goods and services Protecting individual rights and privacy Resolution of national and global problems Regulation to benefit special groups Conservation of resources Social value versus economic cost Benefits of Government Regulation Regulation has helped to: Improve the position of minorities Clean the environment Prevent monopoly Reinforce free competition Prevent corruption Strengthen the banking system Reduce industrial accidents Provide resources for the elderly Control communicable diseases These benefits are enormous and incalculable 10-16 Costs of Regulation 1. Administrative Costs: $37.8 billion in 2007 Costs of regulating (agencies, enforcement,...) Paid by Taxpayers 2. Compliance Costs: $1.1 trillion 11% of GDP Costs to companies to meet regulations Paid by customers/shareholders 3. Indirect Costs: total costs unknown Non monetary costs (employment, productivity, innovation,…) Paid by society in general Administrative Costs of Regulation 10-15 Administrative Costs of Regulation McGraw-Hill/Irwin 10-19 © 2006 The McGraw-Hill Companies, Inc. All rights reserved.