Question 1: What are some of the problems with the concept of public goods?
Public goods are defined as a commodity or service that is provided without profit to all members of a society, either by the government or a private individual or organization. The idea behind them is the government will organize and and decide upon the most efficient strategy of creating, then tax the public in order to build. Once the public good is built (whether it be a lighthouse, a highway, etc.) the public will have the right to use and gain the benefits from it. On paper this sounds like a flawless system, though it does raise the question of why the government excludes the free market from the organization and creation process.
Well, for one the government can use public goods as an excuse to tax the people much heavier then they’d be able to if a private organization was in charge. They say the tax money is all going towards public goods, when in reality only about 2/5th’s of it goes into the creation of public schools and roads. The rest goes towards the military, the government’s stocks, the government’s private commerce, and of course the government workers paycheck. Because of this the government has an incentive to try to get as much tax money as possible, and therefor they look for the most expensive way of creating the public good. Say the government is building a highway. They can either go over the hill, which would be cheap and time efficient but would only allow two gas stations to be built. Or they could go around the hill, which would be much more expensive and take much more time. But it would also allow for six gas stations to be built instead of only two. Going around the hill would not only let the government tax people more for its building funds, but it would also allow for more businesses that would also be taxed. So the government builds the road around the hill, and the public has to pay higher taxes and drive for a longer time.
The point of this is government officials aren’t gods of economics who can mystically plan out a perfect layout for humanity, they are simply humans who want to rake in as much personal benefit as possible. Saying the free market would screw things up if given control is only a way for the government workers to maintain economic dominance. Instead of letting the people who actually use the new road decide which route is best the government claims it can decide for us, and decide more efficiently at that. It’s an idealistic claim, but just because you have government status does not mean you lose your avarice. Just like anyone given full control over a economic project, government officials will usually look for a way to skim something for themselves off the top.
Question 2: Describe the process by which the market economy tends toward an improvement in the standard of living.
In a capitalistic economy society tends to get richer and richer the more time that goes by. The reason isn’t because of government intervention, but rather through individuals hard work and savings. Lets say someone creates a business drawing cartoons. Now, back in the twenties you would need many people putting in hours and hours of drawing by hand to make a decent cartoon. But as time continues better animation techniques and inventions are created, and soon it takes less people and less time to animate. People start getting more free time, which allows them to further improve the way work gets done. The business continues in this way, and over time the cost to create these cartoons falls dramatically. Now the business owner is able to save a lot more of his income, which he can invest into the improvement of his art. The price to create goes down, while the quality goes up. The business flourishes, and through clever investments receives more income than it spends. Through this process of developing, improving, and investing the business owner is able to produce more while spending less.
Some people say the poor just keep getting poorer, but this is ridiculously incorrect. The truth of the matter is we’ve gotten so collectively wealthy that we have begun perceiving luxuries as basic necessities. We take for granted things that would have been seen as science fiction a mere hundred years ago. The “poor” of todays time have more than the wealthiest people of the past. Microwaves, televisions, wireless telephones, refrigerators, security systems, personal automotive vehicles, hair dryers; all of these wonderful inventions we take for granted. How long do you think it took before we were able to create a hair dryer that didn’t catch the occasional head of hair ablaze? And how inspirational and wondrous did it seem when the icebox was first replaced with the refrigerator? These are things we don’t even acknowledge today, let alone think of as luxuries. But they are luxurious, from a three year olds walkie talkie to a 10,000$ computer. These miracles of science weren’t created by government employees deciding the blueprint of humanity, but by passionate capitalists trying to create products that people would want to buy. Through individual development, improvement, and investment we’ve created a country where luxuries are the norm, a country where we can actually fight poverty instead of accepting it and submitting to the thought that its unavoidable. The market economy raises income while lowering labor, and because of the market economy we now live in a world that would have been seen as utterly impossible a handful of decades ago.