john stossel: the power of markets versus the failure...

John Stossel: The Power of Markets Versus the Failure of Regulation

PowerPoint to Accompany Video ClipsPowerPoint to Accompany Video ClipsBy:By:

MARK SCHUGMARK SCHUG

Professor EmeritusProfessor Emeritus

University of WisconsinUniversity of Wisconsin--MilwaukeeMilwaukee

JOSEPH CALHOUNJOSEPH CALHOUN

Florida State UniversityFlorida State University

JOHN MORTONJOHN MORTON

former President of the Arizonaformer President of the Arizona

Council on Economic EducationCouncil on Economic Education

Clip 1: Clip 1:

The Fairness of Market The Fairness of Market OutcomesOutcomes

Preview Question:Preview Question:

�� What do you judge to be best for the poor What do you judge to be best for the poor -- -- income inequality or income equality? income inequality or income equality? Why? Why?

Discussion & Analysis Questions:Discussion & Analysis Questions:

1)1) What is widely regarded as the primary What is widely regarded as the primary characteristic of a fair or just society? characteristic of a fair or just society?

2)2) If people care about the poor, what sort If people care about the poor, what sort of society should we have? of society should we have?

3)3) What does John Tomasi mean when he What does John Tomasi mean when he says people should be authors of their says people should be authors of their own lives? own lives?

Clip 2: Clip 2:

How Market Forces How Market Forces Temper GreedTemper Greed


�� Why do you expect to find food you like Why do you expect to find food you like when you go to a supermarket? when you go to a supermarket?


1)1) What causes so many people to work What causes so many people to work together to bring steaks to New York together to bring steaks to New York City? City?

2)2) Should governments or markets produce Should governments or markets produce the goods and services most important to the goods and services most important to peoplepeople’’s lives? s lives?

3)3) Which does more to temper greed: Which does more to temper greed: voluntary exchange in the marketplace or voluntary exchange in the marketplace or government regulations? government regulations?

4)4) What is the What is the ““invisible handinvisible hand””? ?

Clip 3: Clip 3:

Debunking Common Debunking Common Economic MythsEconomic Myths


�� Do you think that we should favor Do you think that we should favor American products over those from other American products over those from other nations? Do you think nations? Do you think ““buying Americanbuying American””makes Americans better off? Do you think makes Americans better off? Do you think overpopulation explains the poverty that overpopulation explains the poverty that exists in many nations in Asia and Africa? exists in many nations in Asia and Africa? Do you think we are running out of oil? Do you think we are running out of oil? Or, are the main points of these myths Or, are the main points of these myths things we know that may not be so? things we know that may not be so?


1)1) Why is Why is ““buying Americanbuying American”” inefficient?inefficient?

2)2) Is it likely that overpopulation explains Is it likely that overpopulation explains why some nations in Asia and Africa are why some nations in Asia and Africa are poor? Why? poor? Why?

3)3) Jimmy Carter predicted in 1977 that we Jimmy Carter predicted in 1977 that we were running out of oil. Today we have were running out of oil. Today we have more reserves of oil and natural gas than more reserves of oil and natural gas than we did in 1977 after consuming large we did in 1977 after consuming large quantities of fuel over the past 35 years. quantities of fuel over the past 35 years. Why havenWhy haven’’t we run out of fuel? t we run out of fuel?

Clip 4: Clip 4:

The Role of Venture The Role of Venture Capital in Creating New Capital in Creating New

ProductsProducts


�� Are there great new products to be Are there great new products to be invented, or have most of the really invented, or have most of the really important discoveries already been made? important discoveries already been made?


1)1) What are the differences among What are the differences among inventors, entrepreneurs, and venture inventors, entrepreneurs, and venture capitalistscapitalists

2)2) Why do venture capitalists finance Why do venture capitalists finance individuals and firms with new ideas? individuals and firms with new ideas?

3)3) How does the economy benefit from How does the economy benefit from venture capitalists? venture capitalists?

4)4) Describe an economy without Describe an economy without entrepreneurs and venture capitalists. entrepreneurs and venture capitalists.

Clip 5: Clip 5:

Debating the Role of Debating the Role of GreedGreed


�� Some people claim that greed is good. Some people claim that greed is good. What might they mean by that? Is there What might they mean by that? Is there a difference between people acting in a difference between people acting in their own selftheir own self--interest and acting in a interest and acting in a greedy or selfish way? greedy or selfish way?


1)1) Why did the participants in the fish bowl Why did the participants in the fish bowl experiment grab all the dollars in the first experiment grab all the dollars in the first two rounds? two rounds?

2)2) Why did the later rounds of the Why did the later rounds of the experiment go better? experiment go better?

3)3) What are the main arguments posed by What are the main arguments posed by Sally Kohn bolstering her confidence in Sally Kohn bolstering her confidence in government action? government action?

4)4) What are the main arguments posed What are the main arguments posed economist Donald Boudreaux? economist Donald Boudreaux?

Clip 6: Clip 6:

Creative Destruction in Creative Destruction in MediaMedia


�� Are your televisionAre your television--viewing habits viewing habits changing as a result of the Internet? In changing as a result of the Internet? In what ways? what ways?


1)1) What is What is ““creative destructioncreative destruction””? ?

2)2) What are some examples of creative What are some examples of creative destruction in action? destruction in action?


3)3) The Industrial Revolution fundamentally The Industrial Revolution fundamentally changed the American way of life. The changed the American way of life. The average standard of living more than average standard of living more than doubled between 1870 and 1910. doubled between 1870 and 1910. Business itself changed as new forms of Business itself changed as new forms of business organization emerged. New business organization emerged. New jobs were created as others were jobs were created as others were destroyed. Is it possible that the destroyed. Is it possible that the changes of the Internet Revolution will be changes of the Internet Revolution will be as big as the changes in the Industrial as big as the changes in the Industrial Revolution? Revolution?

Clip 7: Clip 7:

Price Gouging Isn't So Price Gouging Isn't So BadBad


�� Is it immoral to raise prices of essential Is it immoral to raise prices of essential goods and services during a natural goods and services during a natural disaster? disaster?


1)1) How do price increases ration goods and How do price increases ration goods and services and allocate resources? services and allocate resources?

2)2) When Superstorm Sandy hit New Jersey, When Superstorm Sandy hit New Jersey, Governor Chris Christie said, Governor Chris Christie said, ““During During emergencies, New Jerseyans should look emergencies, New Jerseyans should look after each other, not seek to take after each other, not seek to take advantage of each other.advantage of each other.”” If a business If a business doubles the price of flashlights, is it doubles the price of flashlights, is it helping fellow New Jerseyans or taking helping fellow New Jerseyans or taking advantage of them? advantage of them?


3)3) Do laws against price gouging help the Do laws against price gouging help the poor?poor?

4)4) If economics shows that price ceilings If economics shows that price ceilings cause shortages, why do so many states cause shortages, why do so many states have antihave anti--priceprice--gouging laws that take gouging laws that take effect if there is a natural disaster? effect if there is a natural disaster?

Clip 8: Clip 8:

Efficiency of Private Efficiency of Private Sector Versus Sector Versus GovernmentGovernment


�� True, false, or uncertain and why? True, false, or uncertain and why? Governments should produce the goods Governments should produce the goods and services that are most necessary for and services that are most necessary for improving peopleimproving people’’s lives (e.g., health care, s lives (e.g., health care, education, transportation, and food). education, transportation, and food).


1)1) What is the Yellow Pages test? What is the Yellow Pages test?

2)2) Are politicians and government officials Are politicians and government officials less greedy than private businesses? less greedy than private businesses?

3)3) What happened when the state of What happened when the state of Indiana leased its toll road to a foreign Indiana leased its toll road to a foreign private firm to operate? private firm to operate?

4)4) Why do private firms produce goods and Why do private firms produce goods and services more efficiently than services more efficiently than governments do?governments do?

Clip 9: Clip 9:

Natural Disasters, Natural Disasters, Government Stimulus, Government Stimulus, and Economic Growthand Economic Growth


�� Some people claim that natural disasters Some people claim that natural disasters like Hurricane Sandy, which damaged like Hurricane Sandy, which damaged large parts of the East Coast in 2012, may large parts of the East Coast in 2012, may have an unexpected silver lining. What have an unexpected silver lining. What positive outcomes could come from all positive outcomes could come from all that destruction? that destruction?


1)1) Why does it appear that the repairs Why does it appear that the repairs following natural disasters are good for following natural disasters are good for the economy? the economy?

2)2) Is it economically correct to claim that Is it economically correct to claim that repairs from natural disasters are good repairs from natural disasters are good for the economy? Why? for the economy? Why?


3)3) The federal government provided funds The federal government provided funds that helped General Motors and Chrysler that helped General Motors and Chrysler survive the financial crisis. What would survive the financial crisis. What would have been the alternative to government have been the alternative to government spending to help these corporations?spending to help these corporations?

4)4) Do you think it is sound economy policy Do you think it is sound economy policy for government to favor the for government to favor the manufacturing sector over the service manufacturing sector over the service sector?sector?

Clip 10: Clip 10:

Shortcomings of Shortcomings of Financial RegulationFinancial Regulation


�� What might be some of the costs of What might be some of the costs of government regulation? Benefits? government regulation? Benefits?


1)1) When should government regulate When should government regulate economic activity? (Hint: It may have to economic activity? (Hint: It may have to do with what Cliff Asness calls negative do with what Cliff Asness calls negative externalities.)externalities.)

2)2) Cliff Asness suggests that some Cliff Asness suggests that some politicians see negative externalities politicians see negative externalities everywhere and many set out to fix everywhere and many set out to fix them. What does he mean by that? them. What does he mean by that? Why is the meaning important? Why is the meaning important?


3)3) What incentives might motivate What incentives might motivate politicians to seek to increase politicians to seek to increase regulations? regulations?

4)4) What is the problem with excessive What is the problem with excessive regulation? regulation?

Clip 11: Clip 11:

Causes and Causes and Consequences of Taxi Consequences of Taxi

LicensesLicenses


�� In New York City, few taxicabs are owned In New York City, few taxicabs are owned by African Americans while in Washington, by African Americans while in Washington, D.C., most taxicabs are owned by African D.C., most taxicabs are owned by African Americans. Why do you think that is the Americans. Why do you think that is the case? case?


1)1) Why might local governments wish to Why might local governments wish to regulate taxicabs? regulate taxicabs?

2)2) What might be an unintended What might be an unintended consequence of taxicab regulations? consequence of taxicab regulations?

3)3) Who benefits from excessive licensing? Who benefits from excessive licensing?

Clip 12: Clip 12:

The Actual Effects of the The Actual Effects of the Minimum WageMinimum Wage


�� Do all Americans deserve a living Do all Americans deserve a living minimum wage so they cannot be minimum wage so they cannot be exploited by business? exploited by business?


1)1) Why hasnWhy hasn’’t the minimum wage eliminated t the minimum wage eliminated poverty?poverty?

2)2) Why is the unemployment rate of Black Why is the unemployment rate of Black teenagers almost twice as high as the teenagers almost twice as high as the unemployment rate of White teenagers?unemployment rate of White teenagers?


3)3) The minimum wage is a price floor. The The minimum wage is a price floor. The price of labor (wages) is fixed by price of labor (wages) is fixed by government above the market price. government above the market price. What are the effects of a price floor? What are the effects of a price floor?

4)4) If minimumIf minimum--wage laws cause wage laws cause unemployment, why are they supported unemployment, why are they supported by 82 percent of the public?by 82 percent of the public?

Clip 13: Clip 13:

Exposing Disability Exposing Disability CheatersCheaters


�� Why is disability fraud so widespread? Why is disability fraud so widespread?


1)1) According to the U.S. Chamber of According to the U.S. Chamber of Commerce, what percentage of disability Commerce, what percentage of disability claims is fraudulent? claims is fraudulent?

2)2) What is the difference between hard What is the difference between hard fraud and soft fraud?fraud and soft fraud?

3)3) Why do so many people not report Why do so many people not report disability fraud when they know it exists? disability fraud when they know it exists?

4)4) How does disability fraud hurt the How does disability fraud hurt the economy? economy?

Clip 14: Clip 14:

What Would Happen if What Would Happen if Welfare Ended?Welfare Ended?


�� Tom Palmer argues that the welfare state Tom Palmer argues that the welfare state is robbing todayis robbing today’’s young people. What do s young people. What do you think he means by that? you think he means by that?


1)1) Why does Tom Palmer think the welfare Why does Tom Palmer think the welfare state is nearing collapse? state is nearing collapse?

2)2) What does Tom Palmer suggest that What does Tom Palmer suggest that young people do? young people do?

3)3) Do you think Tom PalmerDo you think Tom Palmer’’s solutions s solutions adequately address the problem of adequately address the problem of spending on unfunded liabilities?spending on unfunded liabilities?

Clip 15: Clip 15:

Government Reforms in Government Reforms in Puerto RicoPuerto Rico


�� When there is a budget deficit, should When there is a budget deficit, should government leaders cut government government leaders cut government spending or should they increase taxes to spending or should they increase taxes to close the deficit? close the deficit?


1)1) When Luis FortuWhen Luis Fortuñño became Governor of o became Governor of Puerto Rico, what were the Puerto Rico, what were the commonwealthcommonwealth’’s biggest problems? s biggest problems?

2)2) What percentage of Puerto RicoWhat percentage of Puerto Rico’’s workers s workers were employed by the government? were employed by the government?

3)3) What reforms did Governor FortuWhat reforms did Governor Fortuñño o implement? implement?


4)4) Did the GovernorDid the Governor’’s reforms make him s reforms make him popular? popular?

5)5) Why do most politicians finance spending Why do most politicians finance spending by increasing debt rather than by raising by increasing debt rather than by raising taxes or cutting spending? taxes or cutting spending?

Clip 16: Clip 16:

Pork Barrel Spending Pork Barrel Spending SpreesSprees


�� What are some examples of wasteful What are some examples of wasteful government spending? Why do you think government spending? Why do you think such spending seems so hard to end?such spending seems so hard to end?


1)1) What is What is ““pork barrelpork barrel”” spending? spending?

2)2) What are some examples of pork barrel What are some examples of pork barrel spending? spending?

3)3) Who gains the benefits of pork barrel Who gains the benefits of pork barrel spending?spending?

4)4) Who pays the costs of pork barrel Who pays the costs of pork barrel spending?spending?

john stossel: the power of markets versus the failure...

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