Roles of Governement in the Economy

Chapter 1:

The world is made up all types of economic systems that undergo billions of transactions every day, the vast majority without any government involvement. Too much government interaction can lead to the failure that occurs in the Soviet Union. For example, a soviet official visited an American pharmacy and recognized how everything worked in harmony. He asked how this is possible and the answer was simple economics. A store sells products and the companies produce items that stores want to stock. But why is it that we have rich people with private jets and in the same place homeless people? In the market economy, most markets are self-correcting and produce competition. Fixed-price market systems, such as communism/socialism, there is no competition in prices but in quality. A gas station in South Africa might have concierges who clean your car and wear bowties. Firms, consumers, workers all work in their best interest. The real question is how it all works. Economics starts with the fact that individuals act to make themselves as well of as possible. This is not actin selfishly but maximizing utility. Life is about tradeoffs/opportunity costs and so is economics.

Chapter 2:

People commit to crimes because they have a larger gain if they succeed than if they fail. The results outweigh one over the other. People believe that there are more benefits if they succeed than the failures of the same task. They don’t care about the risk of getting caught when the opportunity of getting money is possible. It is also easy to be a “free rider” and let someone else do the work and contribute. Just like this theory says, many tourists and safari operators do exactly what this specifies. One company who invests in conservatism c...

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...to go anyway. They have no incentive with a monopoly. Government shouldn’t be the sole provider of goods or services unless they have legitimate reason to believe that the private sector would fail. Even if government has the role, they don’t have to be the ones who enforce it. They could hire a private company to pour the cement for a road. The private sector allocates resources to where they need it the most and government allocates to where the political process sends it to. But by global standards, the United States has a relatively lightly regulated economy. Taxes can disrupt productivity and many chose not to pay them causing a ripple effect on the economy. Taxes can disrupt investments because people would have to pay for them. The government controls the economy through these measures and the better the government handles the economy, the better we will be.