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  • Hello. I’m Craig and this is Crash Course Government and Politics and today were

  • going to turn to a topic that is near and dear 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 those fans, I say: “youre rightand don’t call me Craigers.”

  • But this episode is going to be about the role that government plays in the economy,

  • specifically, the way that government creates the market economic system that we know and love.

  • [Theme Music]

  • Before I get into the ways that government creates a market economy, let me be right

  • up front and say that were going to posit that 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 likesupply and demandthat are analogous to real physical

  • laws like, say, gravity. Which is also a movie starring George Clooney - he aged so well.

  • This is an interesting construct and one that has important political ramifications, because

  • if you believe in it, then basically there’s nothing that the government can, or should, do to improve the economy.

  • I’ll leave it to commenters to argue this point, but I stand by my statement:

  • We wouldn’t have a market economy without government.

  • So economically-minded political scientists, AND politically-minded economists, will tell

  • you that there are a number of ways that government structures the economy in the U.S. I’m going

  • to go over eight of them, although there might be more.

  • So, in no particular order, here it goes. The government creates 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; and promoting competition.

  • I think most of us can agree that a big part of the government’s job is to establish

  • law and order. This idea goes back at least as far as the Enlightenment and Thomas Hobbes,

  • but since this is not Crash Course: Political Philosophy, I’m going to move on.

  • Law and order helps to structure the economy by providing predictability.

  • It is much harder to engage in trade or production for 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’s burgers that you are actually trading.

  • But it’s not just that the government, if it’s doing its job, can protect us from

  • being robbed in the literal sense of the Hamburgler stealing our delicious, delicious burgers.

  • The government creates a legal system that can punish people 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 that the government structures the economy is by

  • defining rules of property. Now there are many people who will tell you that property

  • is an inalienable right, sort of like something given by God. I’m looking at you John Locke.

  • And John Locke would respond, “don’t tell me what I can’t dobut I would suggest that

  • without government what you think of as your property might not be asyoursas you think or want it to be.

  • But isn’t this sweet polka dot button-up I’m wearing mine? Well, it is because I

  • paid for it and we have laws that say that payment for a good confers a title to itwe

  • see this especially with land, or as it’s known to the law asreal propertyor perhapsreal estate.”

  • We don’t actually receive written titles when we buy most things, but according to

  • the law, if I can establish ownership by proving I paid for this shirt or somebody left it

  • to me in their will or something then it’s mine. And if someone takes it from me, I can

  • bring the law down on them - the courts, the legal system, or maybe the sheriff will help me get it back.

  • A really concrete example of the way the laws create and protect property rights are trespass

  • laws, which allow you to tell those noisy kids to get off your lawn. Without trespass,

  • who’s to say it’s not their lawn?

  • Basically ownership of anything is a bundle of rights establishing what you can do with

  • that thing, whether it’s your car, or your house, or your eagle. And without legally

  • established ownership rules, we can’t buy or sell or punch anything.

  • And speaking of buying and selling, another way that the government structures the economy

  • is through setting and governing rules of exchange. Let’s go to the Thought Bubble.

  • In most states there are complex rules that explain how and when, or even if you can sell

  • something. For example some localities, (like Indiana) have so calledblue lawsthat

  • prevent you from buying or selling alcohol on certain days. Some counties in some states

  • are completely dry, meaning that you can’t buy or sell alcohol at all, and for a brief

  • (terrible) period in the USprohibitionthe Eighteenth amendment to the Constitution

  • prohibited themanufacture, sale, or transportation of intoxicating liquorsManufacture, sale,

  • and transportation, sound like the three main ingredients in an economy to me.

  • Some exchanges are still flat-out forbidden by laws in the U.S.. Many drugs are called

  • controlled substances for a reason, and that reason is that they are subject to government

  • control. Some drugs are prohibited outright and if you make or sell or buy them you can

  • be punished by the government. There are also laws preventing you from selling yourself

  • into slavery, or from selling your body through prostitution, or selling parts of your body

  • like your kidneys. Some economists may question the wisdom of these rules, but they exist and by making

  • and enforcing them the government can exert powerful control over what can and cannot be exchanged.

  • Thanks, Thought Bubble. Probably less controversial than the rules governing exchange is the government’s

  • role in setting market standards.

  • This is something governments have been doing for a very long time, and youve probably

  • learned about it in history class as the government’s setting up weights and measures.

  • This may not seem like such a big deal until you consider that if you are paying someone

  • for a pound of chick peas, you need to know what a pound is...

  • if youre going to get the right amount for that sweet hummus.

  • This goes for measures too. If I am buying an 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 more since a Scottish acre is the equivalent of

  • 1.27 U.S. acres. Plus no one will look at me funny when I’m eating my haggis.

  • Basically this means is that the government insures that buyers and sellers are operating

  • on the same playing field. This used to be even more important when currency contained

  • precious metals, but I don’t want to get into a big argument about pennies and nickels

  • -- that's John Green's thing, and we've all established that I'm not John Green.

  • This brings us to public goods. Public goods are things 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 many places the government provides bus or subway

  • services to residents, not for free, but at highly subsidized costs, although if youve

  • ridden the New York Subway recently it doesn’t always seem like the subsidies are big enough.

  • In many cases the government steps in to provide public goods when markets wouldn’t. It’s

  • not likely that private companies would provide an air-traffic control system, and even if

  • they did, it would have to be highly regulated by the government anyway because you don’t

  • want different cities and states enacting different rules 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’t be profitable.

  • A really good example of the government providing a public good where the market wouldn’t

  • step in is the rural electrification projects of the New Deal, the most famous of which

  • sprang from the Tennessee Valley Authority.

  • It wouldn’t have been profitable for power companies to provide electricity to rural

  • towns and farms, so the government stepped in 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 Live Play.

  • And I'm not good at live theater.

  • You might have heard that the government is not a “job creatorand in some ways that’s

  • true, except for government jobs like firefighters and public school teachers and, if were

  • talking the federal government, soldiers and sailors. But there are other ways that government

  • efforts help to create a labor force.

  • The main way this happens is through compulsory education 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 competence that will enable them to be productive workers.

  • Of course, employers could provide the necessary training at their own expense, but why would

  • they do it if the government provides it for them?

  • Government also helps create the workforce by providing student loans, which help people pay for college.

  • And that's why college is so easy to pay for now.

  • Right? Wink.

  • There are government-run training programs and, I suppose, the potential for the government

  • to employ more people, like it did during the Great Depression with programs like the

  • Works Progress Administration and the Civilian Conservation Corps.

  • Now if youll allow me to put on my economist’s hatStan, do we have budget for an economist’s hat?

  • No. Apparently economists wear very expensive hats. I will try to explain what the government

  • does to ameliorate negative externalities. I love my externalities ameliorated. Especially the negative ones.

  • An externality is an external effect that is a byproduct of a market transaction. They

  • can be positive or negative and can also be seen 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 with lead, which, as we now know is very bad. Very, very bad.

  • Buying leaded gasoline and running your car on it was a private economic transaction but

  • air pollution was a very public cost that neither the seller of the gasoline nor the purchaser had to pay.

  • And air pollution was very costly in terms of public health. So the government ameliorated

  • this by outlawing lead in gasoline and creating regulations 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 negative externalities. Another is through taxes, which

  • well deal with it in another episode.

  • The last way that the government creates our market 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 is competition, and in a perfect world competition

  • would ensure that people got the best products at the best prices.

  • But history has shown that corporations and individuals have often tried to stifle competition

  • and create monopolies. If there’s only one firm selling a product, that firm can charge

  • whatever it wants, and this monopoly condition doesn’t usually benefit consumers.

  • At least not as much as it benefits monopolists.

  • So government can and has stepped in to create laws to regulate monopolies. The best known

  • of these are the anti-trust laws, which are sometimes used against big corporations, like

  • Standard Oil or more recently, Microsoft.

  • And the government can also grant anti-trust exemptions that allow monopolies, as it did

  • for Major League Baseball. Either way, the government, under the Commerce Clause in the

  • Constitution can pass laws that promote or inhibit competition, although usually it tries

  • to make the marketplace more, rather than less, competitive.

  • So that's why I say the government has a big role to play in making a free market economy.

  • You may not be convinced that without government a free 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 produced in association with PBS Digital Studios.

  • Support for Crash Course: U.S. Government comes from Voqal. Voqal supports nonprofits

  • that use technology and media to advance social equity. Learn more about their mission and

  • initiatives at Voqal.org.

  • Crash Course was made with the help of all these free marketeers. Thanks for watching.

Hello. I’m Craig and this is Crash Course Government and Politics and today were

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市場經濟。政府和政治速成班#46 (Market Economy: Crash Course Government and Politics #46)

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    Jane 發佈於 2021 年 01 月 14 日
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