Government inefficiency
-Over regulating-Government can act as a monopolyp.
80
Government allocation vs. private allocation
-Government should NOT be the sole PROVIDER of a good or service unless there is a compelling reason to believe that the private sector will FAIL in that role.-Even if government has an important role to play in the economy, it DOESN'T have to actually do the WORK. p.82
Effects of regulation
-Disrupts the movement of capital labor-Raise the costs of goods and services-Inhibit innovationp.
90
Economic thinking- p.72
-Helping hand vs. grabbing hand
Deadweight loss
Inefficiency associated with taxationp.94
Effects of taxation
-Changes in behavior (could create deadweight loss)-Discourages work and investment
Supply-side economics
Proposes that all tax cuts raise revenuep.97
Laffer curve
Proposes that high tax rates discourage so much work and investment that cutting taxes will earn the government more revenue, not less.
Effect of minimum wage
A higher minimum wage HELPS workers whose wages are raised; it HURTS low wage workers who lose their jobsp.
100
US government "monopolies"
-Education-Postal service-Department of Motor Vehiclesp.82
Private sector (benefits)
Allocates resources where they will have the highest returnp.86
Why do markets work?
Resources flow to where they are valued mostp.87
Effects of poor fiscal policy
-Tax money is wasted with failed investments-Credit is channeled away from worthwhile projectsp.87
Keynesian premise
Government can increase economic growth by stoking the economy during economic downturns.
Fiscal drag
Cost exerted on economy by taxesp.94
Investment vs. consumption
Value can increase with an investment but a consumption can only be an economic lossp.96
