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Should the Government be involved in the Economy?
If no:
•Do we trust each other to make the right decisions?
•Are people inherently good or inherently evil?
•Can businesses be trusted to operate rationally under a market economy?
•Who will take care of the common good?
If yes:
- •What level of government should do it be?
- - Federal, state, local
•What is the primary goal of government involvement?
•Should the government pay for common goods and if they should, how?
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Considerations for Government Involvement
Quality of Life for constituents
Quality of market for businesses
Growth versus Tradition
Environmental concerns
Government aid versus market competition
Fairness versus attractiveness
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Levels of Government
- Local
- •Tax Incentives to Corporations
- •Aid in building, or outright building, the plant and infrastructure
- •Sewage extension, Lighting, Power lines and sources
- State
- •Tax incentives to Corporations
- •Offer larger infrastructure development
- •Build freeway system to the plant and allow easier connectivity for export of product.
- •Subsidized labor training
- •Low interest loans
- •Relaxed regulations
- Federal Level:
- - For Businesses
- •Aid in Research and Development
- •Monopoly “busting”
- •Regulatory Agencies
- •Military Protection
- •Trade Agreements with other Countries
- Federal Level:
- - Macroeconomics: For Society
- •Fiscal Policy
- -Taxing and Spending
- -Controlled by the President and Congress
- Monetary Policy
- -Regulation the amount of money in circulation
- -Controlled by the Federal Reserve
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Competing Theories for Governmental Involvement
- Classical Liberalism
- •Let businesses regulate themselves
- •Laissez-Faire, Laissez Passer
- “Let it be, leave it alone”
- •Adam Smith, John Locke, Voltaire, David Hume, Bernard Mandeville
- •The idea of Spontaneous Order, order that arises through human action instead of human design.
- Utilitarianism
- •“Greatest Good for the Greatest Number”
- •Jeremy Bentham, John Stuart Mill
- Governmental Intervention
- - Keynesian Economics
- •John Maynard Keynes
- •Governmental duties and economy are linked
- •Spend money and give tax cuts when the economy is in dire straits
- •Increase taxes when the economy is booming
- •Focused on Unemployment as the root problem
- •Phillips Curve
- ↓Unemployment ↑Inflation
- •1970s?
-Supply-side Economics (trickle down)
-Focus on Inflation as root problem
-To lower inflation, money needs to be removed from circulation
-Theory-get people to save money by giving tax cuts
-Application-people spent the money they saved from taxes
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Capitalism and Democracy
Both are market driven, people invest, either money or time or vote, for a product.
Are they compatible?
-Capitalism is based on private ownership
-Democracy is based on majority rule
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Equality
Equality of Results- Liberals (Modern day not Classical)
Equality of Opportunity-Conservatives
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