2. All decisions result in both private and social impacts, nothing occurs in isolation EU (11)

3. Why is it important to recognize the seen and the unseen outcomes of a decision? EQ 11, unit 3

4. Yesterday students in all three classes constructed towers out of marshmallows and toothpicks. The goal was to earn the largest total profit. All classes did a great job. The picture below was a common scene.

5. But a few years ago one group did it differently... This group made a profit of $164,000!!!

6. How did the group demonstrate entrepreneurship?

7. Entrepreneurs Transform innovation into economic growth. They develop new methods of production or new products and change the industries. Meet an unfilled need But they must be aware of the risk of failing.

8. An entrepreneurs may... 1. Create new projects that fill voids in the market. 2. Or create new methods to produce that cut costs. 3. Provide money to someone who has an idea.

9. What groups would not like entrepreneurs? Why?

10. Firms already in the market!!!!!! Why? Entrepreneurs turn their world upside down.

11. Predict how the other groups responded when they saw this idea.

12. It is not the smartest or most intelligent species that survive, but the species that is adaptable to change. -Charles Darwin

13. The question is what is the change? Is the change referring to changes in the market leading to new ideas and innovations resulting in “creative destruction.” Or is the change referring to legislation passed by people in government resulting in new laws, regulations, etc. that may prevent dynamic competition.

14. Should the Government prevent change? Why would some say no and others say yes? Should the government protect the business/industry hurt by change? Carry out your logic (think past phase 1 and isolated impacts)

15. "You must separate out being “pro free-enterprise” from being “pro-business.”- Milton Friedman Why would someone who was such a strong advocate for free-enterprise make this comment?

16. "You must separate out being “pro free-enterprise” from being “pro-business.” Almost every businessman is in favor of free enterprise for everybody else, but special privilege and special government protection for himself. As a result, they have been a major force in undermining the free enterprise system. Stop kidding yourself into thinking you can use the business community as a way to promote free enterprise. Unfortunately, most of them are not our friends in that respect." -Milton Friedman What would Friedman’s opinion be on tariffs or business licenses?

17. 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.

18. 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 Ralph Lauren (High End clothing) and the other half owns an up and coming children’s clothing store. 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. _________________________________________________________________________________________________________

19. 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. _________________________________________________________________________________________________________

20. 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

22. Creative Destruction Joseph Schumpeter Entrepreneurs create new products or new methods- New Creations and Destruction of the Old

23. Bailouts A situation in which a business, individual or government offers money to a failing business in order to prevent the consequences that arise from a business's downfall. Bailouts can take the form of loans, bonds, stocks or cash. They may or may not require reimbursement.

24. Capture Theory A situation where the regulatory agencies are dominated or “Captured” by the very industry that it is suppose to regulate. Cronyism favor for favors. Special Interests

36. Topic Which one? How? What if? Should? Why?

40. Creative Destruction

42. Should creative destruction be controlled by the people in the government with the use of bailouts regulations, and tariffs? Should the people in the government create a law that protects the jobs of bank tellers??

43. Relate one of the concepts covered today to a unit 3 essential questions.