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 Free Enterprise -Markets work reasonably well without any government intervention. -People must be able to pursue own-interest which in turn will promote the general interests. -The Government limits involvement -Provides public goods -Contract Enforcement -Law and order -Some regulation -Leaves decisions involving resource allocation up to private sector At times the government should be the Helping Hand -Increase of government intervention to solve for market failures caused by narrow self- interest -Poor information leads to poor decisions -Works to achieve “social good” -Often increase taxes on those goods, services, and activities that are perceived to be “over- supplied” -Subsidizing goods, services, and activities that are perceived to be “under-supplied” -Assumes that government officials know what is good for society -In an effort to achieving “optimal social” outcomes will help the growth of some businesses while hindering the growth of others. The government has evolved into the Grabbing Hand, only making decisions to help themselves and their “Cronies” -Individuals working in the public sector are driven by their self interest. -Government will exploit special interest to keep power or special interest will exploit government officials to get their way. -Rent seeking which results in zero sum -Capture Theory -Iron Triangles -Government will use power impact outcomes -Direct public resources to help their political allies and hurt their political foes.

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?