The G Word with Adam Conover – Unintended Consequences of Drones

While drones provide a level of safety for US military members, they also create an incentive problem for the military. Now that it is easier (and safer) to strike foreign targets, the US uses drones to attach more targets than they would if they hadn’t been invented. This unintended consequence has resulted in thousands of civilian deaths and an increased reliance on deadly technology. This is also another example of a moral hazard in which economic agents take increasingly risky actions because they have been safeguarded against the risk.

The G Word with Adam Conover – Federal Investment in Innovation

The federal government is responsible for funding a lot of the technological innovation that we often attribute to private companies. While the purpose of some of these innovations is to be applied to the military innovation of the US armed forces, a lot of them also end up as vital components of civilian lives. Private companies may not be willing to invest in technological advancements if they may come at a cost to shareholder profit, but the government isn’t as concerned with profitability.

The G Word with Adam Conover – External Benefits of GPS

The global positioning system (GPS) was originally developed for military purposes but has been made available to private companies since 2000. Allowing private companies to build new products and services using this technology has resulted in a massive increase in technological advancement in the US that provides significantly more economic benefit than the cost of operating the GPS system. Estimates place the value of GPS at $1.4 trillion from 1980 to 2019, but the federal government spends relatively little to operate the system.

The G Word with Adam Conover – GPS as a Public Good

Public goods are defined as products that are nonrival and nonexcludable, like the global position system (GPS) operated by the US federal government. The nonrival nature means that it isn’t costly for the government to provide the service to an additional user and the nonexcludability component means that anyone can access that service even if they don’t pay taxes to support the service. While GPS was initially developed for military purposes, the government has made the technology available for anyone with a GPS received and companies have created new products and services based on that technology.

The G Word with Adam Conover – Monetary Stimulus During Covid

Whenever a country enters a recession, there are two classes of responses available: fiscal and monetary policy responses. Fiscal policy responses focus on taxation and spending while monetary policy responses refer to Central Bank activity. In the United States, fiscal policy is administered by the Federal Reserve. The Fed is responsible for influencing the quantity of money and credit in the economy. During the Covid-19 pandemic, the Federal Reserve was responsible for issuing treasury bonds to finance fiscal policy decisions.

The G Word with Adam Conover – Fiscal Stimulus During Covid

The Covid-19 pandemic and subsequent lockdowns sent the US (and world) economies into an immediate recession. The US experienced record high levels of unemployment and a massive reduction in GDP. To counteract this recession, the federal government enacted a series of expansionary fiscal policy recommendations that increased the aggregate demand curve to account for the previous reduction.

The G Word with Adam Conover – Importance of Financial Stability

A stable financial system is an important component of an efficient market. Ensuring financial stability allows markets to allocate resources, assess and manage financial risk, and maintain employment levels close to the natural rate. When a bank has failed, the FDIC works to ensure that there are no major disruptions of financial transactions and that economic agents can continue to operate with confidence. With a strong market, the FDIC doesn’t need to intervene often, but the agency was very active during the Great Recession when a lot of banks failed. When a bank failure does occur, the FDIC works to transfer assets of one bank to an acquiring bank or they will take on those assets themselves until the find a suitable acquirer.

The G Word with Adam Conover – Run for Your Money

In the early 1900s, the banking system wasn’t as stable as we might have hoped. Banks loan out money to borrowers, but are susceptible to a panic when a lot of customers want their money held in savings. A bank run occurs when a large number of a bank’s depositors attempt to withdraw their money simultaneously because they believe the bank will become insolvent. This happened frequently enough during the Great Depression that it put pressure on the President to create an insurance program.

The G Word with Adam Conover – Rent-Seeking in Weather

When companies engage in rent-seeking behavior, they are engaging in behavior that is intended to increase their wealth without a subsequent increase in productivity. Private weather companies use government-funded data and resell that data as if it were proprietary. The same companies have also engaged in lobbying efforts to reduce competition from the National Weather Service and prevent the agency from acting as a substitute.

The G Word with Adam Conover – Weather Forecasts as a Club Good

Club goods, also known as artificially scarce goods, are defined as products that are nonrival, but excludable. Previously, weather forecasts were widely available to everyone, even people who didn’t pay for the information, but private companies have limited the National Weather Service’s ability to provide that information. These private companies still use the data from the NWS, so it doesn’t cost the company to provide service to one more user (nonrival), however, they can withhold that information from people who don’t pay for the premium experience (excludable). Club goods create a deadweight loss to society because the price of the product is greater than the cost of production.

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