Modern Economies

Modern Economies In this lesson, students will identify characteristics of modern economies. Students will be able to define and/or identify the following concepts and terms: Mixed Economy Laissez-faire Free Enterprise E. Napp

Standards • Content Standard 2: The student will evaluate how societies answer the three basic economic questions: what goods and services to produce, how to produce them, and for whom are they produced. • 1. Compare the world’s basic economic systems of market (free enterprise), command, and mixed market economies identifying countries that have adopted each and comparing and contrasting the results those economic systems have produced in those countries as measured by GDP, national prosperity, and individual income and wealth. • 2. Describe the role of the factors of production, land, labor, capital, entrepreneurship and technology in economic systems. • Content Standard 9: The student will evaluate the economic role of government in a market economy. • 1. Explain the role that government has in dealing with issues such as poverty, pollution, and medical research. • 2. Describe the costs and benefits of government assistance programs, education, and other government funded services and projects. E. Napp

ESSENTIAL QUESTION • EQ: How do modern economies function in a way that makes lives easier on its subjects? E. Napp

Just as this apple is not perfect, economic systems are not perfect. While a centrally planned economy has many problems, a free market economy is far from perfect. E. Napp

A Mixed Economy • A mixed economy combines elements of different economic systems to meet the needs of the society. • While modern economies are mixed, every mixed economy is slightly different from every other mixed economy. • Some nations lean more towards central planning with some private ownership while other nations are predominantly free market with limited government intervention. E. Napp

The Chinese communists seized power in 1949. However, today, the Chinese embrace elements of the free market. E. Napp

The Chinese communists realized that workers needed incentives or reasons for increasing productivity. E. Napp

The United States is a mostly free market economy. However, the government does intervene in the market. E. Napp

It is important to remember that many abuses occurred in a totally free market. Child labor is one example of this abuse. E. Napp

Laissez-faire • Laissez-faire was the belief that the government should not intervene in the market. • It meant “let them do (as they please).” • It allowed businesses to operate without any restrictions. E. Napp

Without government intervention, warning labels would not exist. E. Napp

Heroin could be purchased in your local supermarket. E. Napp

Government intervention protects our environment and our lives. E. Napp

Free Enterprise • The United States’ economic system is called the Free Enterprise system. • A Free Enterprise system is a mostly free market economy with limited government intervention. • The government does intervene in the economy when it is in the public interest. E. Napp

So, modern nations have mixed economies. However, like milkshakes, mixed economies are not mixed the same. E. Napp

The government insists that warning labels are placed on potentially dangerous products. Companies don’t always want consumers to know. E. Napp

Our Free Enterprise system is mostly a free market economy. However, the government acts like a lifeguard and intervenes in the economy when necessary. E. Napp

Why does the Government sometimes need to intervene in the economy? • There are many reasons why the government intervenes in the economy. • Some reasons for government intervention are: • To inform consumers about products • To protect the environment • To prevent the sale of dangerous goods • To protect workers E. Napp

The government does not allow the sale of dangerous products like illegal drugs. The government protects the public. E. Napp

Public Policy • The public interest is the concerns of the public as a whole. • A safer car is in the public interest. • Public policy is laws and standards on topics of public interest. • Requiring car manufacturers to install seatbelts is an example of public policy. E. Napp

The government also requires companies to provide full information about their products. E. Napp

Public Disclosure Laws • Public disclosure laws are laws requiring companies to provide full information about their products. • Public disclosure laws exist to ensure that consumers are knowledgeable about the products they purchase. • An informed consumer is a protected consumer. E. Napp

We cannot merely look at a product and know how much fat or cholesterol it contains. E. Napp

Workers also need the government’s protection. What prevents business owners from exploiting its workers? E. Napp

Occupational Safety and Health Administration (OSHA) • OSHA is a government agency that issues regulations on workplace safety. • OSHA conducts workplace inspections. • OSHA requires public disclosure of hazards to workers. E. Napp

What prevents companies from dumping harmful chemicals in our rivers? E. Napp

Environmental Protection Agency • The EPA is a watchdog agency that aggressively targets polluting industries by imposing regulations, cleanup requirements, and penalties. • The EPA protects the environment and ensures that companies do not harm the environment. E. Napp

During the Great Depression, many Americans suffered. Poverty rates increased. E. Napp

President Franklin Delano Roosevelt tried to alleviate the problem by creating programs to help the poor and elderly. E. Napp

Welfare • Welfare is a general term that refers to government aid to the poor. • It includes many types of redistribution programs. • Tax dollars are used to provide income and services to eligible poor people. E. Napp

Those below the poverty threshold are considered poor. E. Napp

Cash Transfers and In-Kind Benefits • The government provides cash transfers and in-kind benefits to people in need. • A cash transfer is a direct payment of money to eligible poor people. • An in-kind benefit is a good or service provided to eligible poor people for free or at greatly reduced prices. E. Napp

Social Security provides cash transfers to the elderly, the disabled, and the orphan. E. Napp

Food stamps and legal aid are examples of in-kind benefits. Eligible poor people are provided with food or lawyers. E. Napp

Temporary Assistance to Needy Families (TANF) • Today, the federal government provides money to state governments. • State governments must design and run welfare programs. • States must adhere to federal rules that create work incentives and establish a lifetime limit for benefits. In the past, there were no limits. E. Napp

Eligible poor people receive benefits for a limited period of time. While they receive benefits, they are being trained to reenter the workforce and become independent. E. Napp

The goal is independence. E. Napp

The Goal of Welfare Reform • The goal of welfare reform is to help people in need by providing them with financial assistance as well as opportunities to become independent. • Limits exist on welfare to ensure that people are trained and encouraged to reenter the workforce. E. Napp

The government’s helping hand ensures that Americans have a safety net in difficult times. E. Napp

Modern Economies