1. The Economic Functions of Government
Council for Economics Education
&
Henry B. Stobbs, MFA

2. Copyright Notice
Original Content 2008 Council for Economic Education and modified for classroom use by the author. Certain materials in this presentation are prepared with the fair use exemption of the U.S. Copyright Law and have been prepared with the multimedia fair use guidelines and are restricted from further use.

3. Concepts Competition Economic stabilization Externality
Income redistribution
Public goods & services

4. Standards (NCEE)
Standard 16: There is an economic role for government in a market economy whenever the benefits of a government policy outweigh its costs. Governments often provide for national defense, address environmental concerns, define and protect property rights, and attempt to make markets more competitive. Most government policies also redistribute income.

5. Standards (NCEE)
Standard 20: Federal government budgetary policy and the Federal Reserve System’s monetary policy influence the overall levels of employment, output, and prices.

6. Standards (NSCG, Grades 9 – 12)
I.B.4: The relationship of limited government to political and economic freedom.
II.C.2: Character of American political conflict.
III.B.2: Major responsibilities of the national government in domestic and foreign policy.

7. Objectives As a result of this lesson, you will be able to:
Classify government economic activities according to the six economic functions of government.
Analyze governmental economic actions within the liberal (progressive)/conservative framework.

8. Purpose
The purpose of this lesson is to examine the economic functions of government.
Follow LP script

9. The (Economic) Constitution of the United States of America
… in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and to Posterity, do ordain and establish this Constitution… Now, exactly how are we going to pay for it all?

10. Six Economic Functions of Government
Maintain the legal and social framework
Maintain competition
Provide public goods and services
Correct for externalities
Stabilize the economy
Redistribute income

11. Six Economic Functions of Government
Maintain the legal and social framework
Define and enforce property rights
Establish a monetary system

12. Six Economic Functions of Government
Maintain the legal and social framework
Maintain competition
Create and enforce antitrust laws
Regulate natural monopolies

13. Six Economic Functions of Government
Maintain the legal and social framework
Maintain competition
Provide public goods and services
Public goods and services are those that markets will not provide in sufficient quantities

14. Six Economic Functions of Government
Maintain the legal and social framework
Maintain competition
Provide public goods and services
Correct for externalities
Reduce negative externalities
Encourage increased production of goods and services that have positive externalities

15. Six Economic Functions of Government
Maintain the legal and social framework
Maintain competition
Provide public goods and services
Correct for externalities
Stabilize the economy
Reduce unemployment and inflation
Promote economic growth

16. Six Economic Functions of Government
Maintain the legal and social framework
Maintain competition
Provide public goods and services
Correct for externalities
Stabilize the economy
Redistribute income
Redistribute income from people who have higher incomes to those with lower incomes

17. Six Economic Functions of Government
Maintain the legal and social framework
Maintain competition
Provide public goods and services
Correct for externalities
Stabilize the economy
Redistribute income

18. Time to Check Your Skills

19. Classify the Headlines
Federal Reserve Raises Key Interest Rate ___
Congress Raises tax rates for Top Income Brackets ___
EPA Plan to Reduce CO2 Emissions ___
Homeland Security Funding Increased ___
President Says More Spending Will Fight Recession ___
Agency Blocks merger of Two Airlines ___

20. Classify the Headlines
City Police Increase Neighborhood Patrols ___
Lawsuit Establishes Patent Rights ___
Legislature Passes Funding for Subsidized Housing ___
New Info from Government Agency Helps Consumers Choose Wisely ___
Songwriter Sues Singer: Says Songs Stolen ___
County Funds Free Flu Vaccinations ___

21. Let’s Check!
Federal Reserve Raises Key Interest Rate E
Congress Raises tax rates for Top Income Brackets F
EPA Plan to Reduce CO2 Emissions D
Homeland Security Funding Increased C
President Says More Spending Will Fight Recession E
Agency Blocks merger of Two Airlines B

22. City Police Increase Neighborhood Patrols C
Let’s Check!
City Police Increase Neighborhood Patrols C
Lawsuit Establishes Patent Rights A
Legislature Passes Funding for Subsidized Housing F
New Info from Government Agency Helps Consumers Choose Wisely B
Songwriter Sues Singer: Says Songs Stolen A
County Funds Free Flu Vaccinations D 22

23. Conservative Perspectives versus Progressive Points of View

24. CONSERVATIVE PERSPECTIVE
Government’s economic role is severely limited
Economic and political freedom undermined by excessive reliance on government
The government’s ability to solve social and economic problems is weak
Faith in government to solve problems is unreasonable

25. Progressive (Liberal) Perspective
The market’s ability to solve complex social and economic problems is limited
Government can do a great deal to overcome weaknesses in the marketplace
Less concerned with the effects of government action on personal liberty
The price system is unfair
Support income redistribution

26. Economics is soooo dreamy!
Time for An Activity
Economics is soooo dreamy!

27. Legislature Passes Funding for Subsidized Housing
Let’s re-examine this headline. What would a progressive think of it? How would a conservative regard it? Answer in complete sentences, please.

28. Headline A
New Info from Government Agency Helps Consumers Choose Wisely

29. Headline B
Agency Blocks Merger of Two Airlines

30. Assessment

31. Assessment Public goods and services are
All goods and services paid for by the government
Goods and services provided by publicly held companies
Goods and services that would not be adequately provided by the market.
Goods and services that are available to the public.

32. Assessment
Establishing and enforcing clearly defined property rights is an example of government
Providing a social and legal framework.
Maintaining competition
Providing public goods and services
Redistributing income

33. Assessment
Smoke from a factory drops ash all over your car. Government’s economic function in this case is to:
Stabilize the economy
Maintain competition
Provide public goods and services
Correct a negative externality.

34. Assessment
The Federal trade Commission recommends that the Smokin’ Hot Computer Corporation be broken into several smaller, independent companies. This is an example of the government’s function of:
Maintaining competition
Redistributing Income
Maintaining the Legal and Social framework
Providing public goods and services

35. Assessment
The fed announced today that it will cut a key interest rate by two basis points. This is an example of the government’s function to
Correct for externalities
Stabilize the economy
Redistribute income
Maintain the legal and social framework

36. Assessment: Extended Response
Federal regulations now require Internet radio stations to pay substantial royalty fees (fees to artists and songwriters) for the music they play. Some stations were not able to pay the fees and have gone “off the air.” What economic function of government is this an example of? Who benefits from the regulation? How? Why? Who loses because of the regulation? How? Why? What argument would you make for and against the regulation?

37. Homework
Many city governments subsidize the construction of sports stadiums as a way to attract or hold on to sports teams.
First, write an argument for this practice, using the economic functions of government to support your claim. Then present an alternative view, arguing against your initial claim. (20 points, plus up to 3 extra if typed)

38. Works Cited
Council for Economic Education. “Lesson 4: What Are the Economic Functions of Government?” Council for Economic Education.