crash diets pros

hello. i’m craig and this is crash coursegovernment and politics and today we’re going to turn to a topic that is near anddear to our wallets at crash course: economics. now, i know that dedicated fans are saying:“hold on craigers, you have a whole series about economics. tell me about government.” to thosefans, i say: “you’re right…and don’t call me craigers.” but this episode is going to be about therole that government plays in the economy,

crash diets pros, specifically, the way that government creates themarket economic system that we know and love. [theme music] before i get into the ways that governmentcreates a market economy, let me be right up front and say that we’re going to positthat without some government, it wouldn’t

be possible for a market economy to exist.[gasp] whaaaaa? i realize that this is a bit controversial,with many people believing that markets are natural phenomena that follow laws like “supplyand demand” that are analogous to real physical laws like, say, gravity. which is also a moviestarring george clooney - he aged so well. this is an interesting construct and one thathas important political ramifications, because if you believe in it, then basically there’s nothing that thegovernment can, or should, do to improve the economy. i’ll leave it to commenters to argue thispoint, but i stand by my statement: we wouldn’t have a market economywithout government. so economically-minded political scientists,and politically-minded economists, will tell

you that there are a number of ways that governmentstructures the economy in the u.s. i’m going to go over eight of them, although there mightbe more. so, in no particular order, here it goes. the governmentcreates and maintains a market economy by: establishing law and order;defining rules of property; governing rules of exchange;setting market standards; providing public goods;creating a labor force; ameliorating externalities; andpromoting competition. i think most of us can agree that a big partof the government’s job is to establish law and order. this idea goes back at leastas far as the enlightenment and thomas hobbes,

but since this is not crash course: politicalphilosophy, i’m going to move on. law and order helps to structure the economyby providing predictability. it is much harder to engage in trade or productionfor profit if you suspect that what you have to trade or sell may be taken away by bandits,like the hamburglar. but -- only -- in that case only if it’sburgers that you are actually trading. but it’s not just that the government, ifit’s doing its job, can protect us from being robbed in the literal sense of the hamburglerstealing our delicious, delicious burgers. the government creates a legal system that can punishpeople who commit fraud, and knowing that they can be punished prevents people from committing fraud.or at least i hope it does. most of the time it does.

don’t do fraud kids. the second way thatthe government structures the economy is by defining rules of property. now there aremany people who will tell you that property is an inalienable right, sort of like somethinggiven by god. i’m looking at you john locke. and john locke would respond, “don’t tellme what i can’t do” but i would suggest that without government what you think of as your propertymight not be as “yours” as you think or want it to be. but isn’t this sweet polka dot button-upi’m wearing mine? well, it is because i paid for it and we have laws that say thatpayment for a good confers a title to it – we see this especially with land, or as it’s known tothe law as “real property” or perhaps “real estate.” we don’t actually receive written titleswhen we buy most things, but according to

the law, if i can establish ownership by provingi paid for this shirt or somebody left it to me in their will or something then it’smine. and if someone takes it from me, i can bring the law down on them - the courts, the legalsystem, or maybe the sheriff will help me get it back. a really concrete example of the way the lawscreate and protect property rights are trespass laws, which allow you to tell those noisykids to get off your lawn. without trespass, who’s to say it’s not their lawn? basically ownership of anything is a bundleof rights establishing what you can do with that thing, whether it’s your car, or yourhouse, or your eagle. and without legally established ownership rules, we can’t buyor sell or punch anything.

and speaking of buying and selling, anotherway that the government structures the economy is through setting and governing rules ofexchange. let’s go to the thought bubble. in most states there are complex rules thatexplain how and when, or even if you can sell something. for example some localities, (likeindiana) have so called “blue laws” that prevent you from buying or selling alcoholon certain days. some counties in some states are completely dry, meaning that you can’tbuy or sell alcohol at all, and for a brief (terrible) period in the us – prohibition– the eighteenth amendment to the constitution prohibited the “manufacture, sale, or transportationof intoxicating liquors” manufacture, sale, and transportation, sound like the three mainingredients in an economy to me.

some exchanges are still flat-out forbiddenby laws in the u.s.. many drugs are called controlled substances for a reason, and thatreason is that they are subject to government control. some drugs are prohibited outrightand if you make or sell or buy them you can be punished by the government. there are alsolaws preventing you from selling yourself into slavery, or from selling your body throughprostitution, or selling parts of your body like your kidneys. some economists may question thewisdom of these rules, but they exist and by making and enforcing them the government can exert powerfulcontrol over what can and cannot be exchanged. thanks, thought bubble. probably less controversialthan the rules governing exchange is the government’s role in setting market standards.

this is something governments have been doingfor a very long time, and you’ve probably learned about it in history class as the government’ssetting up weights and measures. this may not seem like such a big deal untilyou consider that if you are paying someone for a pound of chick peas, you need to knowwhat a pound is... if you’re going to get the right amountfor that sweet hummus. this goes for measures too. if i am buyingan acre of land, i want to make sure that i’m getting 4,046.86 square meters of land,or 43,560 square feet. and if i buy an acre in scotland, i’m going to get even moresince a scottish acre is the equivalent of 1.27 u.s. acres. plus no one will look atme funny when i’m eating my haggis.

basically this means is that the governmentinsures that buyers and sellers are operating on the same playing field. this used to beeven more important when currency contained precious metals, but i don’t want to getinto a big argument about pennies and nickels -- that's john green's thing, and we've allestablished that i'm not john green. this brings us to public goods. public goods arethings and services that the government provides that can be enjoyed by everyone and, once provided, cannot be denied to a particular subset of the population. one example is public transportation: in manyplaces the government provides bus or subway services to residents, not for free, but athighly subsidized costs, although if you’ve ridden the new york subway recently it doesn’talways seem like the subsidies are big enough.

in many cases the government steps in to providepublic goods when markets wouldn’t. it’s not likely that private companies would providean air-traffic control system, and even if they did, it would have to be highly regulatedby the government anyway because you don’t want different cities and states enacting differentrules about air-travel. that would be a literal disaster. also, if it were up to unregulated markets,there wouldn’t be any flights to places with small populations because they wouldn’tbe profitable. a really good example of the government providinga public good where the market wouldn’t step in is the rural electrification projectsof the new deal, the most famous of which sprang from the tennessee valley authority.

it wouldn’t have been profitable for powercompanies to provide electricity to rural towns and farms, so the government steppedin and provided it. and since without electricity it’s pretty hard to watch crash course,i’m glad they did. we'd have to do, like, a crash course liveplay. and i'm not good at live theater. you might have heard that the government isnot a “job creator” and in some ways that’s true, except for government jobs like firefightersand public school teachers and, if we’re talking the federal government, soldiers andsailors. but there are other ways that government efforts help to create a labor force.

the main way this happens is through compulsoryeducation laws. states require that kids go to school up to a certain age and this is to ensure,or at least try to ensure, that when they become adults they will have a level of competencethat will enable them to be productive workers. of course, employers could provide the necessarytraining at their own expense, but why would they do it if the government provides it forthem? government also helps create the workforce byproviding student loans, which help people pay for college. and that's why college is so easy to pay fornow. right?wink. there are government-run training programsand, i suppose, the potential for the government

to employ more people, like it did duringthe great depression with programs like the works progress administration and the civilianconservation corps. now if you’ll allow me to put on my economist’shat – stan, do we have budget for an economist’s hat? no. apparently economists wear very expensivehats. i will try to explain what the government does to ameliorate negative externalities. i love myexternalities ameliorated. especially the negative ones. an externality is an external effect thatis a byproduct of a market transaction. they can be positive or negative and can also beseen as the difference between the private cost and the social cost of economic behavior. here’s an example. driving is an economic behavior.back in the 1970s gasoline included lead, which

made engines run better but also polluted the air withlead, which, as we now know is very bad. very, very bad. buying leaded gasoline and running your caron it was a private economic transaction but air pollution was a very public cost that neither theseller of the gasoline nor the purchaser had to pay. and air pollution was very costly in termsof public health. so the government ameliorated this by outlawing lead in gasoline and creatingregulations that limited air pollution generally. what this did was force companies and, by extension,purchasers to pay for these negative external costs. regulation is one way to deal with negativeexternalities. another is through taxes, which we’ll deal with it in another episode. the last way that the government creates ourmarket economy, at least the last way i’m

going to talk about, is by promoting competition.according to our old friend adam smith, the essence of a functioning market system iscompetition, and in a perfect world competition would ensure that people got the best productsat the best prices. but history has shown that corporations andindividuals have often tried to stifle competition and create monopolies. if there’s only onefirm selling a product, that firm can charge whatever it wants, and this monopolycondition doesn’t usually benefit consumers. at least not as much as it benefits monopolists. so government can and has stepped in to createlaws to regulate monopolies. the best known of these are the anti-trust laws, which aresometimes used against big corporations, like

standard oil or more recently, microsoft. and the government can also grant anti-trustexemptions that allow monopolies, as it did for major league baseball. either way, thegovernment, under the commerce clause in the constitution can pass laws that promote orinhibit competition, although usually it tries to make the marketplace more, rather thanless, competitive. so that's why i say the government has a bigrole to play in making a free market economy. you may not be convinced that without government afree market system wouldn’t be possible, and that’s ok. you can think what you want. it's a free market.thanks for watching. see you next time. crash course government and politics is producedin association with pbs digital studios.

support for crash course: u.s. governmentcomes from voqal. voqal supports nonprofits that use technology and media to advance socialequity. learn more about their mission and initiatives at voqal.org. crash course was made with the help of allthese free marketeers. thanks for watching.

Share :

Tweet

More

Related Post