Self Interest a nd the role of Government

1. Self Interest and the role of Government

2. Origins of Government Power source Relationship between people and government Theory Force Physical strength or military People serve the Government People serve the Government Inherited- family Evolution People Serve the Government Divine Right God Social Contract The Government serves the people The People

3. Thomas Hobbes- Enlightened English Philosopher According to Hobbes. . . man desires and pursues power to assure their self preservation (self interest). when two or more people wanted the same thing, they will become enemies and compete, this is a state of war. war is fought for gain, safety, or glory. it is natural for man to be in a state of war. power is given to an authority in order to unite the people and force them to cooperate with each other. 6 word summary

4. 3- Man pursues self-interest and all yield to let him do as he wishes. 2- Man cooperates with others and all parties enjoy a portion of their self interest. 1- Both parties compete are in a state of war 0- Man yields to other

5. Player 2 Self Interest Cooperation Self Interest 3,0 1, 1 Player 1 2, 2 O,3 Cooperation What enforces Cooperation? Self Interest? Morals and Ethics? Reputation? Government and Laws?

6. Government (Authority/Power) Self Interest Cooperation Revolution Anarchy Self Interest People (Freedom/Power) Cooperation Constitution Limited Government Balanced Equilibrium Dictator If Government consist of people and people are inherently seeking power, who enforces the cooperation? Is there an eventual end? The Supreme Court?, The States? The People? Self Interest?

7. The Social Contract John Locke- Enlightened philosopher Believed that man was free and was given natural rights from God- Life, Liberty, Property Man created Government to protect his rights If the Social Contract was broken revolution was justified 6 word summary

8. The Social Contract The Government- meets the purposes of government, especially protection. If they break the contract they lose their position or are revolted against. The People The Government The Government serves the people but the people obey the government The People- Give up some rights for protection. They follow laws and pay taxes. If they break the contract they give up more rights Mutual and Voluntarily exchange

9. Jean-Jacques Rousseau Believed that . . . man changed when he created society. man substituted justice for instinct. man consulted his reason before impulse. man’s new state derived him some benefits that he got from nature but give him tremendous returns such as protection and happiness. “Instead of a stupid and unimaginative animal, made him an intelligent being and a man.” 6 word summary

10. Stag huntImagine that you live in a primitive society where your only source of meat is to hunt. In the nearby forest live two animals that are hunted by society, the stag and the rabbit.Your only weapons are bows and arrows or spears and therefore you must get within close proximity to successfully kill your food.Individually the rabbit is easily killed but it takes the collective group to kill the stag.Only by working as team can the village eat venison and if one person defects (hunts rabbit) the entire village will suffer.1. What do you do when you see a rabbit cross your path? Remember your family needs to eat. Why is it important to think about what the other hunters will do? 2. What will others do? Hint what do others think that you will do?3. Should society force the hunters to hunt stag? How is this a trade-off?4. What is a Nash equilibrium?5. Why are contracts important? 6. How important is reputation? If a hunter knows that there will be a future hunt how may it change his decision? Relate to Presidential terms and tipping a waitress Which is most efficient? Reputation or contracts/laws? Why?

11. Stag Hunt Player 2 Stag Rabbit Stag 5, 5 0, 2 Player 1 1, 1 Rabbit 2, 0 Nash Equilibrium - a group of players are in Nash equilibrium if each one is making the best decision that he or she can, taking into account that they know the decisions of the others. The key is great communication.

12. Stag Hunt Government (Authority/Power) Cooperate Self Interest Cooperate 5, 5 0, 2 People (Liberty/Power) 1, 1 Self Interest 2, 0 Nash Equilibrium - a group of players are in Nash equilibrium if each one is making the best decision that he or she can, taking into account that they know the decisions of the others. The key is great communication.

13. The Constitution is a coordinated document The Constitution is not contract that needs to be enforced, it is more like a coordinated agreement between liberty and authority. It is in the best interest each player to both pursue their self interest and to limit their own self interest.

14. Let our government be like that of the solar system. Let the general government be like the sun and the states (and the people) the planets, repelled yet attracted, and the whole moving regularly and harmoniously in several orbits.” — John Dickinson (Delaware Delegate), 1787

15. Authority Government Group Equality Liberty Individual Freedom Self Interest Order Justice Equilibrium Balance Securing Liberty Life Liberty Property Unite Provide Protect

16. So is Self Interest A positive natural resource?- Adam Smith Or War?- Thomas Hobbes Or something else? Does the purpose of government compete with or cooperate with the purpose of any economic system? The Preamble Purpose of Economic Systems- To allocate scarce resources that have alternative uses to their most useful place. Write 1 paragraph

17. Examples of Prisoner Dilemmas Mitt vs Newt – Republic Primaries Budget Crisis Price wars Paradox of thrift Government and the people Sports being a team member Tragedy of the commons Traffic Fishing rights Climate Resources Congress and spending

18. Authority Government Group Equality Liberty Individual Freedom Self Interest Justice Equilibrium Balance Free Market Principles Private Property Freedom of Enterprise Motive of Self Interest Competition System of Markets and Prices Limited Government Government Intervention Maintaining Legal and Social Framework Maintaining Competition Providing Public Goods and Services Redistributing Income Correcting for Externalities Stabilizing the Economy Correct Market Failures

19. Government Intervention Maintaining Legal and Social Framework Example: Create laws and provide courts, provide information and services to help economy function better, establish a monetary system, define and enforce property rights. Maintaining Competition Example: Create and enforce antitrust laws; regulate natural monopolies. Providing Public Goods and Services Example: Provide goods and services that markets are unable or unwilling to provide, such as national defense. Redistributing Income Example: Higher income tax rates for rich than for poor, provide social security, and aid to dependent children, Medicare, Medicaid. Correcting for Externalities Example: Taxes to reduce negative externalities, such as environmental pollution; subsidies to encourage positive externalities, such as education. Externalities exist when some of the costs or benefits associated with the production or consumption of a product "spill over" to third parties other than the direct producer or consumer of the product. Stabilizing the Economy Example: Use government budgets and/or the money supply to promote economic growth, control inflation, and reduce unemployment.