Oroville Dam Crisis

Journal Question Erosion underneath the auxiliary spillway of the Oroville Dam (pictured above) nearly caused the auxiliary spillway to collapse. This would have caused catastrophic flooding to the areas downstream from the dam. Nevertheless, the damage already is expected to cost taxpayers around $100 million dollars in repairs this summer, and that is probably a best-case scenario, if the situation doesn't worsen before then. Why are dams like the one in Oroville built and repaired with taxpayer money, rather than by individuals in the free marketplace? What are some positive "externalities" (economic side effects of a good or service) that the public usually enjoy from dams? (When they aren't failing!) What about negative externalities?

American Free Enterprise The Basics

American Free Enterprise I. Constitutional Elements A. Property Rights (protected) – 5th & 14th amendments B. Taxes (individual and business) provide money for public services – Article 1 II. Principles A. Profit Motive = profit drives business to create B. Open Opportunity = Everyone can participate, with different outcomes C. Economic Rights Legal Equality, Private Property, free contracts, voluntary exchange

Check What are the 3 principles of American Free Enterprise

HMMM, I WONDER IF THIS IS THE BEST PRICE FOR THIS DELICIOUS HAMHOCK D. Consumers - make free choices and drive producers E. Government Role – involved in economic policy at a limited level i. Pros Information (requires businesses to give info to consumers/gov.) Consumer Protection Health, Safety (FDA, EPA, FAA, FCC) Gov. purchases from both firms and households ii. Cons Can interfere with prices and efficiency of market

Circular Flow in a Mixed Economy iii. Circular Flow Gov takes in tax money from households & firms Gov buys land, labor & capital from households Gov buys goods/services from firms

Circular Flow Video Fill out the worksheet!

American Economy American Economy – Snapshot Current: 157 Million in Labor Force (workers + unemployed) Current Unemployment: 5% C. Gross Domestic Product i. market value of all goods and services ii. 2008=14.7 Trillion 2010 = 14.6 Trillion -> 2013 = 16.77 Trillion D. Federal (Gov) Budget i. Revenues/Taxes (2016) = 2.99 trillion ii. Expenditures (2016) = 3.54 trillion iii. 2016 Deficit = 552 billion iv. Overall Debt (yearly deficits added together) = roughly 16.5 Trillion III. Goals of American Economy A. Employment B. Growth = more GDP C. Stability = prevent drastic price changes and industry crashes + insure health of banking

V. Government Role A. Supporting innovation B. Providing a Safety Net i. Money for research ii. Patents (exclusive rights to produce a product) for inventors = profits B. Providing a Safety Net i. Welfare, Retirement, Medical Benefits, Education C. Providing Public Goods i. Stuff that gov provides = dams, roads, schools, etc Would not be practical to pay individually Can’t exclude payers (e.g. roads, dams) ii. Financed through Public Sector (taxes) not Private Sector (market) iii. Result from “Market Failures” = when market principles would not result in good being produced

Market Failure Imagine you need to build a road. What sort of incentive would the businesses have to build a road? How would they make a profit? Would customers have choice of roads due to competition? What about roads in low populated areas? So how does the road get built?

Check What are the 3 goals of American Free Enterprise? Name 2 ways the government plays a role in Free Enterprise? What is a governmental safety net? Example? Why does the government provide public goods?

VI. Externalities A. Externality B. Positive Externality Side effect of a good or a service B. Positive Externality Positive side effects of economic behaviors Building a Road now all get to travel on the road Company trains tech workers in a small town, now other company’s don’t have to train workforce You buy a house and fix it up, now neighbors get the benefit of higher property values

Negative Externality Bad side effect of an economic behavior Your neighbor takes up the violin and hosts crazy violin parties for money at his house. You hate violin music A company dumps chemical waste into the river, now the city has to pay for water treatment so the city raises taxes on residents to pay for prob.