How Should the United States Government Carry Out Its Economic Role? Government intervention in the economy…Keynesian Economics

Property Rights: Article I of US Constitution Federal government’s powers under the Constitution Delegated powers? Reserved powers? Concurrent powers? Regulation: establish laws and rules to influence favorable economics US Patent and Trademark Office Essential for Free Enterprise market system? John Maynard Keynes, “Keynesian Economics” Opposite of “Laissez-Faire”

Exception to Private Property! Eminent Domain Power of government to take individual property for public use if the owner is “fairly” compensated 5th Amendment: “Nor shall private property be taken for public use without just compensation” The “Takings Clause”: Kelo v. City of New London, 2005

Regulatory Roles of Government Acts to maintain competition when markets don’t! Regulatory agencies: Justice Department, Federal Trade Commission. In restraint of trade, mergers

Government Protection of Consumers Food and Drug Administration Teddy Roosevelt The Jungle, Upton Sinclair Department of Labor Franklin Delano Roosevelt New Deal Legislation Francis Perkins

Should Government Deregulate? Removal of government restrictions on firms’ economic activity to increase competition – more of a free enterprise system

Government Involvement in Externalities and Public Goods Positive versus Negative Externalities Public education versus health care Implementation of corrective taxes, cap and trade permits (use of energy and pollution limits) Preservation of Common Resources Tolls, Quotas, Privatization Overused or destroyed = “tragedy of the commons” Government Failure? Causes inefficient allocation of resources Gray Davis and deregulation of energy, 1990s

Government Promotion of Economic Well Being? Beginning with the Great Depression, 1929 – World War II New Deal of FDR Cold War defense industries, 1945-1989 Kennedy’s New Frontier, 1960-1963 Johnson’s Great Society, 1964-1968 *Government welfare system has become ingrained…American citizen: “government must take care of us!”

Government Regulation Vocabulary Eminent Domain Regulatory Agencies Merger Deregulation Externalities and Public Goods Common Resources Tragedy of the Commons