Today's lesson focused on the foundational importance of the government and the rule of law. Government, properly ordered, gives rise to a functional economy by providing for property rights so that individuals are incentivized to use resources in the most efficient manner. Doing so means that the costs of one's action or inaction will fall upon them and not be reappropriated. Of course a government that is powerful enough to protect you is also powerful enough to take from you. Creating structures such that governments neither find it in their best interest to protect others at your expense or to protect themselves at your expense is the difficult part. Remember also that trust among individuals and with the government results in a willingness to spend my time at what costs me the least. In order to do so, I must become vulnerable and depend on the fact that others will trade with me.
As an aside, government can play an important role when someone else's actions have an effect on society at large. In cases of externalities having government involvement can produce better outcomes but this depends 1) on the structure that is put forward to solve the issue and 2) whether the government might give undue influence to parties which have a specific interest in the issue at hand (ie tobacco companies' lobbies being involved in tobacco legislation).
Next time we'll further discuss just how the government can change behavior via taxes, how they generate revenue, and how and when fiscal policy could be used by using the analogy of personal finances.
Read BE 433-436, 444-451, 458-465, and 468-470. Respond to this question: When do you personally take a loan? why? Now, use the same idea and tell me, when might it be smart to spend more money than you take in as a government (whether you take a loan, sell bonds, or dip into savings)?
Finally, the paper is located at: K:\DF\DFEG\Economics\Econ201\Fall 2013\Balser
As an aside, government can play an important role when someone else's actions have an effect on society at large. In cases of externalities having government involvement can produce better outcomes but this depends 1) on the structure that is put forward to solve the issue and 2) whether the government might give undue influence to parties which have a specific interest in the issue at hand (ie tobacco companies' lobbies being involved in tobacco legislation).
Next time we'll further discuss just how the government can change behavior via taxes, how they generate revenue, and how and when fiscal policy could be used by using the analogy of personal finances.
Read BE 433-436, 444-451, 458-465, and 468-470. Respond to this question: When do you personally take a loan? why? Now, use the same idea and tell me, when might it be smart to spend more money than you take in as a government (whether you take a loan, sell bonds, or dip into savings)?
Finally, the paper is located at: K:\DF\DFEG\Economics\Econ201\Fall 2013\Balser
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