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Naked Economics 3-5
Transcript of Naked Economics 3-5
Lauren, Joe, and Danny Naked Economics Chapters 3-5 Chapter 3 Main Ideas: Examples Used: 1) Examples Used: -The government watches private companies to make sure they don’t do anything that has social consequences.
-helps regulate negative externalities by taxing the offending behavior, rather than banning it.
-constantly helps put regulations on things that benefit society as a whole. Chapter 4 Main Ideas: Government:
-Government works just as well as we would logically expect it to because many of its programs lack incentives
- Should only be the sole provider of a good or service if there’s a really good reason for it Examples Used: Chapter 5 Main Ideas: In this chapter, Wheelan describes how important information is in economics. He discusses what we do with information and how we decide our decisions we make based off of it. "What we don't know can hurt us." Discrimination in companies is often used with gender and race due to information. Usually the information of women who take paid maternity leaves and then quit when they return is common, so men are hired more, as well as criminal records for different races. Information in economics goes beyond discrimination to branding of companies. Branding helps to provide an element of trust, as well as a profitable strategy with the use of information. Information makes health care different from the rest of the economy (patient doesn't pay the bill and demands a lot of care, doctor maximizes income and minimizes lawsuits, insurance maximizes profits and pays for as much little care as possible, and technology introduces expensive options.) 2) McDonalds...consumers and firms create their own mechanisms to solve information problems. Every hamburger at McDonalds tastes the same no matter where you are in the world, which is the heart of the company's success. Even if you are out of the state, you know McDonalds will be safe, clean, inexpensive, open seven days a week, and how many pickles will be on the burger. You know all of this information before you leave the car in an unfamiliar place. 3) Branding: Companies such as Coca-Cola, Nike, or Sara Lee , create a monopoly for themselves and price their products accordingly by showing the buyers that their products are one of a kind and like no other. Politics and the Economy:
- The government is too heavily affected by political issues to allocate resources properly
-The private sector, meanwhile, allocates resources where they are best
-because of this, it is best that the economy is as far removed from politics as possible Regulations:
- It is often the structure of regulations that is the problem
- can be very bad for the economy and can allow businesses to manipulate the political system for their own benefit
-can make entrepreneurship almost impossible and cause corruption levels to raise Taxes:
-reduce people’s purchasing power and utility
-High taxes cause behavioral changes in people that are bad for the economy
while also not raising revenue for the government
“If the government took 90% of your income, how many of you would work more
than the bare minimum you needed to scrape by?”
-discourage work and investment, which takes away from capital that could be
used to further grow the economy Government and The Economy II -The Department of Motor Vehicles. ( works terribly, but this is because they have no incentive to be any better: “Every single person who needs a driver’s license already comes to the DMV and will continue to come no matter how unpleasant the experience.”) “How many of you would be comfortable taking airplane flights if pilot’s licenses were not regulated by the government, and instead were just issued by private firms? The real question: How big of a role should government play in the United States?
-The answer: It depends!
~economists generally disagree on this question, no matter how intelligent and thoughtful they are
-but no matter its size, an ideally functioning government will spur economic growth and make its people better off Thank you!!
Any Questions? “Good government makes a market economy possible.” (65)
The author means that government mandates all of the rules, as well as protecting property rights. The
government helps make a market economy possible because of everything that it inputs and helps make it available. This chapter expressed the importance of government involvement in a market economy. This relates to what we are learning because we have been taught about incentives, which the government uses to regulate the market economy in society. Choices are made daily throughout the government to make specific actions and opinions. Government and The Economy Economics of Information - Traveling with children. Parents do not pay the full cost for their child, yet travelers around pay the full negative externality. Children are noisy and smelly, so parents who pay little to nothing for their travel fees are not paying for the negative externalities their children carry.
- Litter is another example. When a person litters, if not caught they do not pay the negative externality of their garbage which had just been thrown on the ground. That garbage could cause a problem to a individual; a bird, or eventually the whole world; helping pollute the ocean, and lowering the fish population as a human food source.
- An example of a positive externality is a lovely office view. You are not paying the company you work for to give you an office with a nice view. You also are not paying every building and plant back for the joy they give you when looking upon them. Every person who put effort to create the beauty you are gazing upon is not paid by you personally for your enjoyment. - The government also redistributes wealth. They collect taxes from certain citizens, and gives benefits to other citizens.