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.
A domestic production subsidy is a government payment to firms in a particular industry in an effort to increase production. This can be done as a form of monetary policy in response to recessions or in an attempt to increase trade. Countries might also want to subsidize industries that it believes are important to the growth of the economy. One problem with such subsidies is that they may not necessarily go to their intended recipients. While farming subsidies may have helped smaller farmers during the Great Depression, they are mostly going to large corporations today.
Whenever an action creates a negative externality, the private individual allocates too many resources toward the production of that item. This happens because the producer is focused on their own profit maximization problem and is not accounting for any external costs associated with production. When it comes to meat packing or factory farming, producers don’t take into account the external costs of pollution or the potential risk of bacterial infection. Regulating such industries can mandate that firms take into account the social costs of production rather than the private cost of production.
The US has subsidized farm production of grains and corn since the Great Depression, which has resulted in a surplus of production. As a result, the US is able to produce a lot of processed snacks that use grains and corn, but it has the unintended consequence of creating negative health impacts. While the goal of the policy has been on increasing the incomes of farmers, it has resulted in more obesity in America
Blue Laws in the United States date back to Puritanical times when local governments wanted to ensure that people were in church on Sunday and observing the sabbath. Today, Blue Laws are a form of prohibition that limits the amount of time that businesses can sell profits. While most states have removed their blue laws, some still remain, like the inability to sell cars on Sundays or more extreme limitations like those in Bergen, NJ. This Stossel clips argues that the prohibition is a restriction of freedom for businesses that want to sell products.
I reached out on Twitter to solicit advice for great music videos associated with different lessons, and my former teaching assistant responded with this great song from the Beatles. One of the great lines from the song goes like this:
If you drive a car, I’ll tax the street,
If you try to sit, I’ll tax your seat.
If you get too cold I’ll tax the heat,
If you take a walk, I’ll tax your feet.
This is a great opener for a lesson on taxes and tax policy.
Thanks to Marissa Reuther for the song suggestion
Cartman and the gang head to KFC after soccer practice only to find out it’s been converted into a new medicinal marijuana shop. Cartman convinces his mom to drive him to a nearby town for KFC, but that show has closed as well. Cartman learns that Colorado has recently passed a bill that bans fast food in low-income areas, but it turns out KFCs were only built in low-income cities, so there are effectively no more KFCs in the state. The state government has essentially set a price ceiling for KFC in low-income areas at zero dollars. One of the predictable side effects of these price controls is a black market for the item. Items with price ceilings also tend to have inefficiently low quality. The banning of fast food causes Cartman to enter the black market to feed his KFC addiction. In later scenes, Cartman is upset because he catches a dealer cutting the KFC gravy with Boston Market gravy. When the dealer suggests he can take the gravy back, Cartman notes that no one wants fried chicken without gravy, implying the two items are complements.
Thanks to Thomas Jandora for the clip reference
This is a classic example of a price ceiling, where the government comes in and sets a maximum price on what can be changed to consumers. One of the most prolific examples of price ceilings is rent control. In this episode of Friends, Chandler brags about how because the apartment was rent controlled, it was a ‘freaking steal!’
Thanks to James Tierney for the clip and description.
This video does a nice job of describing many of the economic arguments for and against raising the minimum wage in a comical way. The clip is a few years old, but it still does a nice job of discussing many of the common arguments. Note: the clip does include a supply and demand graph, but it labels supply and demand incorrectly! This is a good opportunity to discuss economic misconceptions, as well as the labor supply and labor demand curves.
Thanks to Rebecca Chambers for the clip and description!
Bloomberg corresponds provide some background on the taxi medallion industry and shows an interesting perspective before the big surge of Uber in the city. The original article can be found here.