Chapter 5

Question 1

Socialize

Answer 1

spread to society, at large

Question 2

A socialist asserts that

Answer 2

an individual should act to promote the good of society, not the promote the individual’s wellbeing

Question 3

Karl Marx said that production should come

Answer 3

“from each, according to his ability, to each, according to his need”

Question 4

External cost

Answer 4

costs that naturally spill over to others

Question 5

Externalities

Answer 5

external costs and external benefits

Question 6

Fascism

Answer 6

Economic system in which the state leaves property in private hands but closely regulates

Question 7

Eminent domain

Answer 7

where property is taken for state public use, such as roads, and parks, but the owner is compensated.

Question 8

Civil forfeiture

Answer 8

where a person is suspected of a crime and that person’s property is seized because it is automatically suspected as having contributed to the crime

Question 9

What is the latest socialist rationale?

Answer 9

If the state provides any good from which the individual might derive external benefits- for examples roads, schools, and food courts- that no property is private and the state is justified in dictating the use of the individual’s property and income

Question 10

What did Marx predict about unemployment rates?

Answer 10

technological advances would replace labor with capital, causing a growth in unemployment

Question 11

According to socialists, something keeps individuals from auctioning off their labor to their highest bidding firm. What is it?

Answer 11

firms are not in competition, they are all on the same side

Question 12

Why were people looking for a new way of selling socialism in the 1950’s?

Answer 12

because Marx’s predictions about worsening conditions of workers and unemployment did not come to pass

Question 13

T/F: Only government socializes costs and benefits by taxation and subsidy. There are no costs and benefits that are socialized unless the government does it.

Answer 13

False; some benefits/costs are not socialized by government, such as the benefit from national defense and cost of pollution

Question 14

What reason do capitalist philosophers give for not expanding the state to solve the problem of externalities?

Answer 14

public choice school points out that government employees are self interested and have limited knowledge. This means

1) they may not be interested in solving problems, but in getting re-elected and getting money and
2) their limited knowledge may cause them to make things worse as they solve problems

Question 15

How can the state maintain a socialist order if individuals disagree about their abilities, needs, or what is good for society?

Answer 15

by force

Question 16

What did Burkhauser, Larrimore, and Simon show?

Answer 16

we see a 37% growth in incomes when we use household data, account for taxes, transfers, and fringe benefits, and adjust for household size

Question 17

What 2 observations did Thomas Sowell make about society?

Answer 17

1. as people age, gaining experience and education, they grow richer.
2. people who are poor can increase their incomes and the wealthy sometimes lose income, moving them to different brackets

Question 18

What did Milton Friedman point out in an interview with a talk show host?

Answer 18

leaders of all states are greedy, but Capitalism harnesses greed to improve the general welfare

Question 19

What is the approximate poverty rate in the US?

Answer 19

16%

Question 20

How much does the US spend yearly on anti-poverty per poor person?

Answer 20

$20,000

Question 21

How does the poverty rate relate to anti-poverty spending and economic growth?

Answer 21

poverty doesn’t seem related to anti-poverty spending but economic growth does reduce poverty, with a lag.

Question 22

What is one area where government spending on fairness replaced private spending?

Answer 22

unemployment insurance and education

Question 23

What does Bastiat say about countries with machines vs. those with less mechanization?

Answer 23

More mechanization allows people to have more satisfaction for less work, so mechanized societies are well off

Question 24

Who typically receives the proceeds of a civil forfeiture?

Answer 24

the law enforcement officer that seized the property

Question 25

Why is the percentage of spending done by the state a measure of the degree of socialism?

Answer 25

Because as the state spends more, it makes more of the economic decisions–that is the individual, more and more, serves the state’s conception of “the good of society”

Question 26

What do many capitalist philosophers consider the legitimate functions of the state?

Answer 26

protection of persons and property

Question 27

What does “the pursuit of happiness” mean?

Answer 27

The right to use property freely, to choose one’s profession, to make contracts, and to travel

Question 28

If property rights are protected, how can an individual in a capitalist society advance materially?

Answer 28

By creating value through production or trade

Question 29

How do markets encourage conservation of a resource that becomes scarcer?

Answer 29

By increasing its price

Question 30

What do capitalist philosophers say about how markets solve fairness problems?

Answer 30

Markets may not solve fairness problems, but, given the limitations of the state, it might not do any better, and may make things worse