Transcript AP 25- POLICY MAKING

In the margin of your handout
Rank these ten public policy concerns in
order of importance:
Welfare and Poverty
Education Reform
Renewable Energy
Immigration
Infrastructure
Improvements
Healthcare and
Reform
Terrorism
Obesity
Disaster Preparedness
Gun Control
• ACTIVITIES DESIGNED
TO DETERMINE WHTHER
OR NOT A POLICY IS
WORKING AS INTENDED
• WHAT ARE SOME OF
THOSE ACTIVITIES?
The Law of Unintended
Consequence
• “The law of unintended consequences, is
that actions of people—and especially of
government—always have effects that are
unanticipated or unintended. Economists
and other social scientists have heeded its
power for centuries; for just as long,
politicians and popular opinion have
largely ignored it.”
– Rob Norton, Economics Editor, Fortune
Magazine
EVERY
…MUST BE PAID
FOR…SOONER OR LATER
Two Ways of Policy-making:
• Monetary policy:
– Manipulation of the supply of money and
credit in the private sector
• Fiscal policy:
– The impact of the federal government’s
budget on the economy
Monetary Policy: How “the Fed”
Works
• Main instrument of
monetary policy
• Created by Congress in
1913 to regulate bank
lending practices
• Appointed, not elected
with 14-year terms
The Ridiculously Complicated Fed summed
up into three basic instruments for
controlling the money supply:
• #1- Setting interest rates
Three basic instruments for
controlling the money supply:
• #2- Sets requirements that determine how
much banks must keep on hand
Some
number!
Grumble,
grumble,
grumble…
Three basic instruments for
controlling the money supply:
• #3- Buying and selling • Buy bonds injects
bonds
money into
economy inflation
rises
• Sells bonds takes
money out of the
economy inflation
decreases
Fiscal Policy: Two Schools
• Keynesian
– Government spending
and deficits can help
economy through ups
and downs
– Ideologically liberal
• Austrian or “supplyside”
– Too much income goes to
taxes
– Lower taxes returns
purchasing power to
consumer economic
growth
– Ideological conservative
Why President Obama’s
Stimulus Plan Didn’t Work
Why President Obama’s
Stimulus Plan Didn’t Work
Why President Obama’s
Stimulus Plan Didn’t Work
In the economic sphere an act, a habit, an
institution, a law produces not only one
effect, but a series of effects. Of these
effects, the first alone is immediate; it
appears simultaneously with its cause; it is
seen. The other effects emerge only
subsequently; they are not seen; we are
fortunate if we foresee them.
Frederic Bastiat’s “Broken
Window Theory”
Austrian or “Supply-side”
Austrian or “Supply-side”
Austrian or “Supply-side”
Austrian or “Supply-side”
Austrian or “Supply-side”
Austrian or “Supply-side”
Why Critics of “trickle-down”
Economics are Wrong
Why Critics of “trickle-down”
Economics are Wrong
Why Critics of “trickle-down”
Economics are Wrong
Why Critics of “trickle-down”
Economics are Wrong
Why Critics of “trickle-down”
Economics are Wrong