Government Regulation Microeconomics Government Regulation

Goals Explain how the government encourages businesses while also protecting citizens. Define and provide examples of public goods and safety nets. What are the benefits and drawbacks of government regulation, in general.

I. The Constitution and Economic Rights Protection of property is under the Fifth Amendment Property Rights The government may tax individuals and businesses Taxation Allows people to enter legal business agreements Contracts Property Rights: the government may not take land without compensating those from whom it was taken; 14th amendment extended this to states; they still may take land if there is a public use; eminent domain; must compensate the government; applies to businesses as well Taxation: Congress can only tax in ways explicitly stated in the Constitution; taxes collected are based off the population of a state; 16th changed our tax system to the income tax Contracts: legally binding agreements; Constitution prevents businesses and individuals from using the political process from excusing their contracts

II. The Role of Government in the Marketplace Educated consumers make the free market system more efficient. Public disclosure laws Information Limits on the actions of businesses in order to protect public interest. Federal agencies enforce these policies Public Health, Safety, and Well-Being Promote public interest (concerns of society as a whole) Information: businesses have to inform people on their product or service; energy efficiency; nutritional facts; FDA (1906); FTC (Federal Trade Commission 1914) anti-trust; EEOC (Equal Employment Opportunity Commission 1964); OHSA (Occupational Safety and Health Administration 1970) Cuts profits and slows growth and raised government spending Seinfeld Clip: http://yadayadayadaecon.com/clip/46/

III. Public Goods Availability to all (rich or poor) Paid for by taxes Characteristics The benefit to each individual is less than the cost that each would have to pay if it was provided privately. The total benefits to society are greater than the total cost. Cost-Benefit Criteria Office Clip: http://economicsoftheoffice.com/all/?jel=D62

IV. Safety Nets Safety Nets Examples The many government programs designed to provide for people during their times of economic hardship. Examples TANF (Temporary Assistance to Needy Families) Medicaid WIC (Women, Infant, and Children) Unemployment Food Stamps

V. Benefits and Drawbacks of Regulation Protection from unfair practices and faulty products. Oversight of ethics and moral standing. Provisions and relief for the needy. Drawbacks Slows down productivity. Limits output. Forms barriers of entry for producers.