1. The Microeconomy and The Government: Macroeconomics
what government can do to remedy problems of market power and market failure in an economy.
“practical” solutions for government in trying to remedy problems.
Should the government intervene in trying to solve problems, or let the problems solve themselves?

2. Remedying Market Power: Leveling the Playing Field
passing and enforcing anti-discrimination legislation (civil rights, gender, age, etc.).
North American Free Trade Agreement (NAFTA) – free trade among US, Canada, and Mexico.
Labor Unions – giving labor equal leverage to bargain with employers.

3. Remedying Market Failure: Providing Public Goods
Government provides Public Goods/Services (military, highway, police, etc.).
Public Goods try to solve the free- rider problem by taxing everyone to pay for these goods.

4. Attempting to Remedy Market Failure: Externalities
Government passes and enforces legislation protecting community property (clean water, clean air).
Government places an additional tax or fine on the offending entity. (banks were fined for housing bubble crisis)

5. Problems in Attempting to Remedy Externalities
Finding sufficient evidence of harm (e.g. secondhand smoke).
Finding sufficient evidence of blame (e.g. acid rain, fracking).
Placing a dollar value on External Cost (e.g. noise, lack of sleep, aesthetic loss).

6. Should Government Intervene?
Interventionist – a position which asserts that government is capable of forming effective solutions to distortions and inefficiencies in an economy.
Non-Interventionist (laissez-faire) – a position which asserts that free markets are best at solving distortions and inefficiencies, and that government is at best part of the problems.

7. Criteria for intervention?
Is government a regulatory source for consumers or do they benefit special interest groups?
Is government wise enough to spot the inefficiencies accurately, and to propose, pass, and enforce effective solutions?
Is the “web of connections” just too complicated for government to tinker around with a piece?

8. Government Policy and Distributive Justice
How much should government take care of the poor, or disadvantaged groups?
How much should government strive for greater equality in income distribution?
How much should government strive to provide most if not all with a reasonable standard of living (e.g. “living wage”)?

9. Sacrificing Equity for Efficiency: Rent Controls
Experiment – In New York City after World War II, city created subsidized housing for middle-class World War II veterans.
Rents were well-below market, and were guaranteed until death.
Created increased shortages for this housing over time, stunted the growth of new housing.

10. So Should Government Intervene?
Reasonable people can disagree.
How well does the market economy work on its own?
How well does the government work?
Marginal Benefit versus Marginal Cost of government intervention.
Based upon individual values and perceptions.