SWU 181 – Assignment Module Two 1 Name: Keisha Ward Chapters 3 and 4/Module 2 Question 1. 1. Concept 1: Chapter 3 (page 58) Externalities – the gap between the private cost and the social cost of behavior – individuals have an incentive to do things that make them better off at the expense of others. o Example: A large company accused of producing a pesticide that is going into local water and poisoning families. The polluting company maximizes profits by selling a product that causes cancer in innocent victims. Farmers who are unaware of the pollution will reward the company by buying more of its products, which will be cheaper or more effective than what can be produced by competitors that invest in making their products nontoxic. 2. Concept 2: Chapter 3 (page 75-77) Public Goods – it makes us better off but would not otherwise be provided by the private sector. o Example: Buying an antimissile system to protect myself from missiles lobbed by rogue nations. Then asking my neighbor if she would like to share the cost of the system. 3. Concept 3: Chapter 3 (page 78) Redistribution – collecting taxes from some citizens and provide benefits to others. SWU 181 – Assignment Module Two 2 o Example: Economists cannot prove that taking a dollar forcibly from Jeff Bezos and giving it to a starving child would improve overall social welfare. 4. Concept 4: Chapter 4 (pages 90) Crony Capitalism – a system in which associates of a leader (legally or illegally) are given rewards or advantages in return for their political backing. o Example: Projects that have the potential to be highly profitable do not gets financing while dubious undertakings sponsored by the president’s brother-in-law are lavished with government fund. 5. Concept 5: Chapter 4 (pages 97-98, 106) Deadweight Lose – the cut in surplus that arises from a market distortion, like tax. o Example: People would prefer to work, if they can take home every dollar they earn may, they may then decide to leave the workforce when the marginal tax rate is fifty percent. The government raises no income. Question 2. I chose the article “Why We’re All Crony Capitalists, Like It or Not,” which connected with the crony capitalism from concept four. The article connects with concept one because it shows how all political parties concur on the contempt for crony capitalism. It explains how individuals in power can join hands with lawmakers to get their way. This article was about how political party activist are directing that spirit into a real, tangible change in policy. Instead of them talking about ending crony capitalism, they are making it SWU 181 – Assignment Module Two 3 happen. It shows how economy really work, and how big businesses and the government are unavoidably tangled together. What I got from the article was that the government picks and choose between businesses in our country. I got that some big businesses could lead a shut-down of another, if they are being hurt, in ways of losing out on money, etc. In the article it showed how an airline company was “bailed out” by the federal government and that they still benefit to this day from the strict rules that forbid foreign air carriers from competing with their airline that was put in place years ago. even with celebrities being paid more due to their talents, they affect regular working people. It is hard for people to survive in this world, and it dissuades individuals. SWU 181 – Assignment Module Two 4 References Irwin, N. (2014, June 19). Why We're All Crony Capitalists, Like It or Not. The New York Times. Retrieved January 24, 2022, from https://www.nytimes.com/2014/06/19/upshot/why-were-all-crony-capitalists-like-it-ornot.html Wheelan, C. J. (2019). Chapter 3: Government and the Economy/Chapter 4: Government and the Economy II. In Naked Economics: Undressing the Dismal Science (pp. 57–107). essay, W.W. Norton & Company.
